China’s VAT on Exports: The Glacial Shift From a Heavy Hand to the Invisible Hand

Abstract

The world’s VAT systems have settled on a standard for cross-border sales, providing full relief from taxation in the source country to leave room for full taxation in the destination jurisdiction. China’s export VAT rules, which provide selective relief from tax on exports as a tool of economic management, deviate greatly from these international norms. This article reviews the evolution of China’s export VAT rules since 1984, tracking the nexus between tax policy and economic policy. It also suggests possible paths for future development.