Reforming Value Added Tax in Mainland China: A Comparison with the EU

Value added tax (VAT) is a consumption tax that is applied in many countries today. It was introduced in mainland China during the 1994 tax reform. The Chinese VAT system imitates the European VAT system. This article discusses the Chinese VAT system and its problems with evasion. China’s recent reform experience is also compared with the European Union (EU) experience in implementing VAT. The article discusses what lessons can be learned from the experience in mainland China and the EU, so that VAT evasion is minimised.