RESEARCH ON TAX BURDEN OF TRANSPORTATION
AND STORAGE INDUSTRY IN CHINA
Wang Dongmei, Zhou Cairong
School of Economics and Management, Beijing Jiaotong University, Beijing, China
Ju Songdong
School of Economics and Management, Beijing Jiaotong University, Beijing, China
Keywords: Transportation and Storage Industry, Tax Burden, Tax Problems, Countermeasures.
Abstract: Using traditional methods to evaluate the tax burden level of Transportation and Storage Industry has some
great defect; this paper used Modified Method of the Excess Profits to evaluate the tax burden level of
Transportation and Storage Industry in China, and found that the tax burden of Transportation and Storage
Industry is heavy. By analyzing the problems of the existing tax policy in Transportation and Storage
Industry, we proposed appropriate countermeasures.
1 INTRODUCTION
Transportation and Storage Industry is the most
fundamental and most important part of modern
Logistics Industry. As a new producer services,
modern logistics industry has become the accelerator
of promoting economic development, the State
Council will take logistics industry included the top
ten revitalization plan in 2009. In order to fully
implement the "plan" and to promote the
development of Transportation and Storage Industry,
the government should take some effective fiscal
policy support measures for the development of
Transportation and Storage Industry. The state's tax
preferential policies should build on the correct
evaluation of the tax burden in Transportation and
Storage Industry, and reasonably determine the
strength of support in order to achieve better results.
With the changes of the economic environment,
some existing tax system has not suited to the
development of Transportation and Storage Industry,
these problems have become one of the bottlenecks
of the development of Transportation and Storage
Industry, the tax system needs improvement.
In China, research on the tax burden of the
Transportation and storage industry and the
problems in tax policy has great practical
significance, and the domestic research is very little.
2 THE ANALYSIS OF THE
TAX BURDEN OF
TRANSPORTATION
AND STORAGE INDUSTRY
IN CHINA
The traditional evaluation method is to use tax
income (expense) account the proportion of Industry
value-added (or profit, income) to evaluate the tax
burden. Usually, by comparing the tax burden of the
various sectors and the social macro tax burden, you
can come to the conclusion that the tax burden of the
industry is high or low.
According to the China Federation of Logistics
& Purchasing statistics, the rate of profit of
Transportation and Storage Industry is lower than
the community average, and in recent years, the
average rate of profit of Transportation and Storage
Industry decreased year by year. Because of the
industry characteristics, Transportation and Storage
Industry needs many appropriate infrastructures, and
the characters of these facilities are a large
investment, long cycle and low rate of return. The
industry characteristics of Transportation and
Storage Industry determine that it cannot bear a
heavier tax burden. For Transportation and Storage
Industry which has a very low rate of profit, using
the traditional method to evaluate the tax burden,
586
Dongmei W., Cairong Z. and Songdong J..
RESEARCH ON TAX BURDEN OF TRANSPORTATION AND STORAGE INDUSTRY IN CHINA.
DOI: 10.5220/0003595205860590
In Proceedings of the 13th International Conference on Enterprise Information Systems (PMSS-2011), pages 586-590
ISBN: 978-989-8425-56-0
Copyright
c
 2011 SCITEPRESS (Science and Technology Publications, Lda.)

may lead to the wrong evaluation results.
Based on the evaluation index of the tax burden
by traditional method, we take the social average
profit margin as a frame of reference, and use
Transportation and Storage Industry profits to revise
the traditional evaluation index. So as to better and
more accurately reflect the actual tax burden of
transportation and storage industry, to provide the
objective reliable theoretical basis for the national
policy.
Marx's "political economics" mentioned that
"investment in all sectors the same as the profits
made should be the same, which formed a so-called
social average profit margin, which is the result of
competition between departments. It makes the
inconsistencies between the various departments
disappear, thus forming the average profit margin."
Because of each department's profit margins, the
capital will be taken away from the lower margins
department, and put into other higher margins
departments. According to the level of profit margin,
the capital allocation between different sectors will
form a proportion between supply and demand, so
that different production departments will have the
same average profit margin. Based on this, the
Modified Method of the Excess Profits added the
industry factors, the margins of various departments
that mentioned in Marx’s "political economy ".
The Modified Method of Excess Profits’
evaluation as follows:
(1) Calculate the average profit margins of the
total assets of all industries
(2) Calculate the profit margins of the total
assets of Transportation and Storage Industry
(3) Calculate the theoretical profit of
Transportation and Storage Industry：
The theoretical profit of Transportation and
Storage Industry = the total assets of Transportation
and Storage Industry × the average profit margins of
the total assets of all industries
(4)
Calculate the Excess profits of transportation
and storage industry：
The Excess profits of transportation and storage
industry = the actual profit of Transportation and
Storage Industry - the theoretical profit of
Transportation and Storage Industry
The Excess profits is negative, the actual profit
margin of this industry is lower than average profit
margin for all industries.
(5) Calculate the Tax liability of transportation
and storage industry
The Tax liability of transportation and storage
industry = the average Tax liability of transportation
and storage industry + the Excess profits of
transportation and storage industry
The average Tax liability of transportation and
storage industry = the total profits of Transportation
and Storage Industry × the average level of tax
burden of all industries
The average level of tax burden of all
industries = the total Tax revenue of all industries /
the total profits of all industries
(6) Evaluation of the tax burden of
Transportation and Storage Industry
Comparing the Tax liability of transportation and
storage industry with the actual amount of tax paid
of transportation and storage industry, if the actual
amount of tax paid of transportation and storage
industry is more than the Tax liability, then the Tax
burden is higher; if the actual amount of tax paid of
transportation and storage industry is less than the
Tax liability, then the Tax burden is lower.
According to the related data of the National
State-owned enterprises from 2006 to 2008, we use
Modified Method of the Excess Profits to calculate
the tax burden of Transportation and Storage
Industry. The calculation process and the results are
shown in Table 1.
Table 1: Evaluation of the tax burden of Transportation
and Storage Industry Unit: billion yuan.
item 2006year 2007year 2008year
Net rate of the total
assets of all industries
2.95% 3.77% 2.40%
Net rate of the total
assets of transportation
and storage industry
1.22% 2.08% 0.74%
Excess profits of
transportation and
storage industry
-686.38 -721.92 -943.68
The average level of tax
burden of all industries
1.15 1.00 1.47
Tax liability of
transportation and
storage industry
148.26 609.92 -127.51
The actual amount of
tax paid of
transportation and
storage industry
605.20 862.40 889.50
The Excess amount of
tax paid of
transportation and
storage industry
456.94 252.48 1017.01
Source: It was calculated from the data in the "China Financial
Yearbook (2009)"
It can be seen from Table 1: Considering the
industry profit margins, transportation and storage
industry from 2006 to 2008 the tax burden is very
high.
Since January 1, 2009, China implemented the
new "The provisional regulations on VAT of the
PRC"(State Council Decree No. 538), allowing
general VAT taxpayer offset the amount of input tax
RESEARCH ON TAX BURDEN OF TRANSPORTATION AND STORAGE INDUSTRY IN CHINA
587

contained in the new purchased fixed assets; for
small-scale VAT taxpayers, the VAT tax rate from
6% and 4% reduced to 3%. It’s better for an industry
which subject to VAT, because its turnover tax
burden will be a certain level of reduction. The main
business of transportation and storage industry all
belong to tax category of business tax, do not enjoy
the preferential of transformation of value-added tax;
to begin in 2009, the tax burden of transportation
and storage industry will rise further.
3 TRANSPORTATION
AND STORAGE INDUSTRY
TURNOVER TAX REVENUE
SYSTEM SHORTCOMINGS
AND COUNTERMEASURES
The problem posed by the Chinese tax system is one
hand of the reasons that caused the higher tax burden
of transportation and storage industry; this needs the
deep-seated tax reform. China plans to implement a
series of tax reform during "12
th
Five-Year",
including optimize VAT and business tax revenue
system; expand the scope of VAT collection.
The shortcoming of the existing tax system is
another hand of the reasons that caused the higher
tax burden of transportation and storage industry;
this can be done by improving the tax system. Under
the assistance of China Federation of Logistics and
Purchasing, we have done a lot of research about
some enterprises of transportation and storage
industry, did some in-depth analysis on the
experience of tax issues, and found that current tax
policy needs to improve in many areas. In
accordance with China's current tax system, the
taxes that transportation and storage industry
involves are business tax, stamp duty, deed tax,
property tax, land use tax, land value increment tax,
urban maintenance and construction tax and
education surcharge, travel tax and corporate income
tax. In China, the total business turnover tax spends
about 90% of tax expenditures, so this paper only
consider the most important part of turnover tax, and
the urgent need to address the issue of improving the
tax system in the transportation and storage industry.
3.1 All Kinds of Business Income
Apply Different Taxable Items
and Tax Rates in Transportation
and Storage Industry
According to the current taxation policy, according
to the transportation business tax items, enterprise in
developing transport business pay 3% of the
business tax taxable services; enterprise in
developing the storage, loading and unloading,
distribution business pay 5% of the business tax
taxable services. Modern enterprise characteristic is
to provide the comprehensive, integrated service,
various businesses context-sensitive, has been
difficult to distinguish the transportation and
warehousing and partial income. And with the
development of modern logistics, transportation and
warehousing and other business will be further
integration. In Transportation and storage industry,
all kinds of business income apply different taxable
items and tax rates, on the one hand are not
conducive to the integration and development of
logistics industry, and on the other hand are not
conducive to the national tax collection and
management.
According to the Third National Economic
Census data shown that the margin of warehousing
operations is only 2.6%, not only lower than the
industry average, also lower than that of the road
transport industry. Storage business tax rate is 5%,
higher than the transportation industry, which not
only violates the principle of tax fairness, will lead
to the production operation of the financial outflow
from the storage industry and undermine the
balanced development of the logistics industry.
We propose to reduce the business tax rate of
storage business, take the rate of transportation
business as the reference, unified business tax rate of
transportation and storage industry to 3%, which
reflects the tax is fair, but also to facilitate tax
collection and management.
3.2 The Threshold of Logistics Tax
Pilot Enterprise is Too High
Since 2005, China began to carry out the logistics
revenue pilot, the State Administration of Taxation
has approved six pilot batch of logistics enterprises
to effectively solve the problem of duplication sales
tax in Pilot enterprises, reduce the tax burden,
strongly support for the logistics industry. But only
593 enterprises became the pilot enterprises, there
are two provisions of the basic conditions for tax
pilot logistics enterprises, so many companies do not
have to declare the tax status of pilot enterprises:
(1) The taxpayers must have the right to draw
VAT invoices themselves, and have transportation,
warehousing and other outsourcing business.
The new "PROVISIONAL REGULATIONS OF
THE PEOPLE'S REPUBLIC OF CHINA ON
ICEIS 2011 - 13th International Conference on Enterprise Information Systems
588

BUSINESS TAX " stipulates that "taxpayers will be
sub-contracted transport services to other units or
individuals, to obtain all of its consideration and
other charges net of the payments to other entities or
individuals the balance of the transport costs
Turnover." For logistics companies in the
transportation business, even if no qualified pilot
enterprises, and indeed the difference between the
taxes according to the logistics industry are a more
serious tax duplicate storage business. Simply
engaged in the storage business, do not need to bring
their own means of transport logistics, business
requirements of the pilot eligibility requirements
from billing taxpayers just so many logistics
enterprise storage pilot enterprises do not have the
basic conditions for taxes. Logistics revenue pilot
enterprises effectively solve the problem of
duplication sales tax, reduce the tax burden, strongly
support for the logistics industry. The eligibility
requirements that the pilot enterprises from billing
taxpayers need to have are inconsistent with the
purposes of logistics tax the experimental work, for
those who do not need or do not have the means of
transportation logistics company owned serious
injustice.
(2) Corporate business tax last year and the
additional amount actually paid no less than one
million.
Large-scale logistics business will achieve this
standard, the annual turnover of at least 1.8 (1/5.5%)
million, or 3.03 (1/3.3%) million. In fact many small
businesses need logistics support of national policies,
the provision of logistics enterprises is not
conducive to fair competition.
We propose to abolish the basic conditions for
pilot enterprises of logistics in the tax business from
billing taxpayers for eligibility requirements in order
to review in accordance with recognized national
standards for Grade A logistics company; to cancel
the most recent year for logistics companies actually
paid the business tax and the additional amount of
not less than one million request.
3.3 Provisions that Taxpayers can
Draw VAT Invoices Themselves
Limit The Development of the
Transportation Industry
According to the existing provisions, taxpayers who
can draw VAT invoices themselves can pay the sales
tax at the rate of 3% only when providing
transportation services; otherwise they should pay
the sales tax at the same rate as the service industry,
which the rate is 5%. To obtain the qualifications for
self-billing taxpayers must have vehicles themselves.
There are principle of territoriality limits to the
vehicles owned by self-billing taxpayers, in some
place self-billing taxpayers are asked to have a
certain numbers of local vehicles by the tax
department, in some other place, the amount of
invoices is decided by tonnage of each vehicle, but
the amount cannot meet the business needs of the
freight invoice.
Many transportation companies need to operate
their business across the country. A feature of
modern transportation enterprise is that they should
cooperate with each other, integrating operations and
developing network management. Many enterprises
which equipped with few or no vehicles integrate
social resources, such as individual vehicles.
Cooperation is the feature of modern business which
makes obtaining the eligible of self-billing taxpayers
become difficult. Taxpayers should pay the sales tax
at the rate of 5% which is the rate of service industry
without the eligible of self-billing; what’s more,
ordinary VAT payer cannot deduct the input tax.
The current standards for self-billing taxpayers do
not meet the characteristics of modern business.
In this paper, we propose to relax the standard of
"self-billing the taxpayers ". Firstly, cancelling the
geographical restrictions of the registration of
vehicles and all the vehicles owned by the taxpayers
can be counted regardless of where the vehicle
registers; secondly, cancelling the rule that the
vehicles owned by branch offices of group
enterprises should be calculated separately.
Assessing group enterprises by its total number of
vehicles, without requiring each branch have their
own vehicles; thirdly, cancelling the requirements of
the number of vehicles owned by taxpayers, and
drawing the invoices according to actual revenue.
3.4 The Transformation of VAT
Relatively Increase the Tax Burden
of Transportation and Storage
Industry
Since January 1, 2009, China begin transform
production-based vat tax into consumption-based
vat，which allowing general VAT taxpayers deduct
the input VAT of their new purchased fixed assets.
After the transformation of vat, these taxpayers’
turnover tax burden will be generally reduced. As all
operations taxation of the transportation and storage
industry belong to the business tax levy category,
that lead no discount from the reform, so the tax
burden for relevant enterprises relative and fixed
assets purchasing costs both relatively increased.
RESEARCH ON TAX BURDEN OF TRANSPORTATION AND STORAGE INDUSTRY IN CHINA
589

However transportation and storage accounts for a
high proportion in the management process of the
fixed asset investment. In National top 10 key
industry adjust revitalization plan, except Modern
logistics, the other nine industry all belong to the
business tax levy category, which means get
discount from the reform. But only modern logistics
suffered discrimination in tax policy.
Here is a suggestion that while purchasing new
fixed assets, the transportation and storage industry
enjoy the same treatment as the general VAT
taxpayers, that is to say allowing logistics using the
containing in the new purchased fixed assets
(machine, machinery, transportation tools and other
equipment and instruments for production and
operation etc.) deduct the current business tax, and
the redundant VAT can be deduct the next business
tax.
4 THE GOAL OF CIRCULATING
TAX FOR CHINESE
TRANSPORTATION AND
STORAGE INDUSTRY
REFORMATION
The further goal of the tax system reform of China is
to increase VAT taxation range. The range of
existing VAT in China covering sales, processing,
repair and other services, however, transportation
and storage industry and other service industry
which closely related to goods trade is not included
in the scope, and they are required to pay business
tax. There are a series of questions because of the
limitation of the scope of VAT in China, first of all,
it weaken the internal constraints of various links
which is closely interlinked in the deduction chain of
VAT because of the “break” of the buckle chain
between VAT of goods sold and the business tax in
taxable service. Secondly, it is difficult to determine
the scope of taxation at break area, there may be
disputes between enterprises and tax authorities.
This phenomenon increased the difficulty in tax
collection; thirdly, when goods which has paid the
VAT entering the sales tax payment stage, they are
required to pay full amount of sales tax and cannot
deduct the input VAT, so the problem of double
taxation have not been resolved; Fourthly, the VAT
credit document is not standardized. In order to
implement the VAT deduction mechanism, VAT
invoices are used. However, the deduction
certificates in current operation are not limited to
VAT invoices, Such as transportation invoice can
also deduct tax. Fifthly, as there are differences in
tax calculation basis, tax rates, calculation methods,
etc., the tax burden on VAT taxpayers and business
taxpayers are not fair.
Transportation and storage industry is an
extension of the production manufacturing industry;
it plays a role as a link of the national economy. The
overall mechanism of value-added tax would be
affected without including the transportation and
storage industry. So we suggest that it should be
included in the scope of the VAT collection and this
can solve double taxation problem in transportation
and storage industry radically.
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APPENDIX
This thesis is Beijing Jiaotong University excellent
doctoral technology innovation fund project.
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