VAT Compliance Burdens in the OECD and China

This article compares VAT compliance costs in OECD countries with those in China, a significant competitor and trading partner of most OECD countries. The long and sometimes complex evolution of China’s turnover tax system into a more modern VAT contributed to the compliance burden but recent changes have aligned the tax closely with those found in OECD countries. While compliance costs remain higher than OECD norms in some respects, China has a unique opportunity to substantially modernise and reform its VAT system as it moves from the provisional regulation under which the tax has operated for the past 27 years to a VAT law. At the same time, China’s late entry into modern tax administration and its embrace of technology have enabled it to bypass entirely many of the systems that continue to hamper long-established VAT administrations. The comparison of China’s VAT compliance burdens with those in OECD countries reveals a number of opportunities for reform