An Analysis on Price and Tax Revenue Effects of VAT Reform in China

China has implemented a reform of the VAT (Value Added Tax) in 2009. We estimate, in this study, effects of this VAT reform on prices and tax payments by industry with a focus on "refund rate of export tax" and "tax credit of investment goods". As to "refund rate of export tax", suppose all the export tax is refunded, the domestic price will decrease by 1.3% point and the tax revenue will decrease by 14%. As to "tax credit of investment goods", the domestic price will decrease by 1.5% point and the tax revenue will decrease by 10% after this system is introduced, which those effects are especially large in such capital intensive industries as Automobile, Electronics, and Steel.