THE Ministry of Finance plans to introduce a 6 percent value-added tax (VAT) for financial institutions, replacing the current 5 percent corporate tax on the sector, sources with direct knowledge of the situation said.

    The sources said the Ministry of Finance is consulting banks, having notified them that the change will take place Oct. 1.

    The Ministry of Finance did not answer calls requesting comment.

    The sources said that the VAT will likely raise the net tax burden of Chinese financial firms.

    China has already implemented value-added taxes on other sectors, part of a wider push to reform the taxation system.

    A VAT system taxes the difference between the sale price charged to a customer, minus the cost of materials and other taxable inputs, and is collected at the point of sale, making it theoretically easier to collect than individual and corporate taxes.

    (SD-Agencies)