Core Viewpoint - The unique tax system of "zero tariffs, low tax rates, and simplified tax structure" is a competitive advantage for Hainan Free Trade Port, which will release greater policy dividends as the island officially closes its borders for operations [1]. Tax Policy and Industry Transformation - A series of tax incentives exclusive to Hainan Free Trade Port will gradually reshape the commodity circulation and industrial layout after the island's closure. The "zero tariff" policy will shift to a negative list model, exempting goods not listed from tariffs, increasing the number of tariff-exempt items from 1,900 to approximately 6,600, covering 74% of production materials, a 53% increase from before the closure [6]. - The policy for duty-free domestic sales of processed goods with a value-added rate of 30% will be further optimized, removing the requirement that 60% of the main business income must come from encouraged categories, thus broadening the scope of beneficiaries [6]. - The tax advantages will significantly lower the procurement costs for enterprises importing raw materials and intermediate goods, enhancing profitability through the use of zero-tariff investment goods [6]. Industrial Layout Changes - The tax policies will fundamentally change the industrial layout of Hainan, transitioning from a "multi-point distribution" model to a "core agglomeration area + regional collaboration" model centered around key parks. Industries such as raw material-dependent manufacturing, deep processing of agricultural products, and biomedicine are expected to benefit significantly [7]. Policy Synergy and Efficiency - The combination of "zero tariffs" and duty-free domestic sales for processed goods will create a supportive policy framework for enterprise development. The shift from a "positive list" to a "negative list" management model will enhance customs efficiency and provide a solid institutional guarantee for the free flow of goods [8]. Defining Legal Benefits - Hainan is establishing an "open and orderly" tax environment through clear definitions of eligibility for tax benefits, anti-tax avoidance clauses, transparency, and strict anti-money laundering mechanisms. The core requirement of "substantive operation" distinguishes Hainan from traditional "tax havens," ensuring that tax benefits are closely linked to real economic activities [10]. Simplified Tax System Reform - The ongoing "simplified tax system" reform aims to enhance Hainan's global competitiveness by consolidating various taxes into a sales tax, which will be levied at the retail stage for goods and services. This reform is being advanced cautiously and in phases [12]. - The reform will require transitional policies to allow for tax deductions or refunds on pre-reform inventory, and careful design of sales tax rates to prevent arbitrage due to price discrepancies [12][13]. Regulatory Framework - To address potential issues arising from the simplified tax system, a "three-chain integration" regulatory framework is proposed, promoting the upload of supply chain information, dynamic monitoring of financial flows, and the use of blockchain for invoicing [13].

Core Viewpoint - The unique tax system of "zero tariffs, low tax rates, and simplified tax structure" is a competitive advantage for Hainan Free Trade Port, which will release greater policy dividends as the island officially enters a closed operation phase [1] Tax Policy and Industry Ecology - A series of tax incentives exclusive to Hainan Free Trade Port will gradually reshape the commodity circulation and industrial layout after the island's closure [2] - The "zero tariff" policy will shift to a negative list model, exempting goods not listed from tariffs, expanding the covered goods from 1,900 to approximately 6,600, which includes 74% of production materials, a 53% increase from before [2] - The policy for duty-free domestic sales of processed goods with a value-added rate of 30% will be optimized, removing the requirement for 60% of revenue to come from encouraged business activities, thus broadening the scope of beneficiaries [2] Industrial Development and Policy Support - The changes will fundamentally alter Hainan's industrial layout, transitioning from a "multi-point distribution" model to a "core agglomeration area + regional collaboration" model [3] - Key industries such as raw material-dependent manufacturing, deep processing of agricultural products, and biomedicine are expected to benefit significantly, potentially forming high-end manufacturing and specialty agricultural processing zones [3] - The combination of "import duty exemption - value-added processing - domestic sales duty exemption" will empower private enterprises to integrate deeply into the dual circulation pattern and achieve industrial upgrades [3] Legal and Regulatory Framework - Hainan is establishing a transparent and orderly tax environment through defined eligibility criteria, anti-tax avoidance clauses, and strict anti-money laundering mechanisms [4] - The core requirement of "substantive operation" distinguishes Hainan from traditional tax havens, ensuring that tax incentives are linked to real economic activities [5] Simplified Tax System Reform - The ongoing "simplified tax system" reform aims to enhance Hainan's global competitiveness by consolidating various taxes into a sales tax, which will be levied at the retail stage [6] - The reform will be implemented gradually, with transitional policies allowing for tax deductions or refunds on pre-reform inventory to prevent arbitrage [6] - A comprehensive regulatory system is suggested to address potential issues arising from the simplified tax system, including tax evasion and cash transaction monitoring [7]

Core Insights - The unique tax system of "zero tariffs, low tax rates, and simplified tax structure" is a competitive advantage for Hainan Free Trade Port, which will release greater policy dividends as the island officially operates under customs closure [1] - Hainan is building an "open and orderly" tax environment to attract global resources while preventing systemic risks, achieving the dual goals of "loose management and strict control" [1] Tax Policy Changes - The "zero tariff" policy will shift to a negative list model post-customs closure, expanding the number of tariff-exempt goods from 1,900 to approximately 6,600, covering 74% of production materials, a 53% increase from before [2] - The policy for duty-free domestic sales of processed goods with a value-added rate of 30% will be optimized, removing the requirement for a 60% revenue share from encouraged main business activities, thus broadening the scope of beneficiaries [2] - The tax advantages will significantly lower procurement costs for enterprises importing raw materials and production equipment, enhancing profit margins for manufacturing [2] Industrial Transformation - The tax policies will fundamentally change Hainan's industrial layout, transitioning from a "multi-point distribution" model to a "core agglomeration area + regional collaboration" model [3] - Key sectors such as raw material-dependent manufacturing, deep processing of agricultural products, and biomedicine are expected to benefit significantly, potentially forming high-end manufacturing and specialty agricultural processing zones [3] - The shift from a "positive list" to a "negative list" management model will enhance customs efficiency and provide a solid institutional guarantee for the free flow of goods [3] Regulatory Framework - Hainan is establishing a transparent and orderly tax environment through defined eligibility criteria, anti-tax avoidance clauses, and strict anti-money laundering mechanisms [4] - The core requirement of "substantive operation" distinguishes Hainan from traditional tax havens, ensuring that tax incentives are closely linked to real economic activities [4][5] Simplified Tax System - The upcoming "simplified tax system" reform aims to promote offshore trade by consolidating various taxes into a sales tax, which will be levied at the retail stage for goods and services [6] - A transitional policy is suggested to allow tax deductions or refunds for pre-reform inventory, preventing tax arbitrage [6] - A "three chains integrated" regulatory system is proposed to enhance monitoring of supply chains, financial flows, and invoicing, ensuring compliance and market inclusivity [7]

Core Viewpoint - The "simplified tax system" at Hainan Free Trade Port aims to enhance its competitive advantage by consolidating various taxes into a sales tax, which is expected to attract capital and improve the tax revenue structure [1][3][4]. Tax System Reform - The "simplified tax system" will merge multiple taxes, including VAT and consumption tax, into a single sales tax, significantly reducing the issue of double taxation [3][6]. - The reform is anticipated to lead to a notable price differentiation for goods in Hainan, with manufacturing firms benefiting from reduced costs due to tax exemptions on imports, while local small businesses may face price increases [3][10]. International Comparison - Many developed free trade ports, such as Hong Kong, utilize simple tax systems, which Hainan aims to emulate to enhance its tax competitiveness and attract investment [4][8]. - International examples, like Singapore's 7% Goods and Services Tax (GST), provide valuable insights for Hainan's tax reform [8]. Tax Design Challenges - The core goal of the reform is to create a simple and scientifically structured tax system with lower tax burdens, but challenges remain, particularly in designing the sales tax [6][10]. - Two main design approaches for the sales tax are proposed: "broad tax base with low rates" or "narrow tax base with high rates," with experts suggesting that the former may better suit Hainan's goals [6][7]. Implementation and Challenges - The Ministry of Finance is progressing with the sales tax reform, emphasizing a gradual and orderly approach, but full implementation may not occur within the current five-year plan due to complexities [10][11]. - The reform may simplify the tax system but could also complicate tax administration, especially in managing a dispersed taxpayer base and preventing tax evasion [11].

Core Viewpoint - The "Simplified Tax System" at the core of the special tax arrangements in Hainan Free Trade Port will enhance its unique competitive advantages after the port's closure operation begins [1] Tax System Reform - The "Simplified Tax System" aims to consolidate various taxes into a sales tax, which will be levied at the retail stage for goods and services, thereby reshaping the tax structure and enhancing tax competitiveness to attract capital [2][4] - The reform is expected to significantly reduce double taxation, particularly benefiting manufacturing enterprises reliant on imported raw materials, while local small businesses may face price increases due to tax burdens at the sales stage [4][5] International Comparison - Many mature free trade ports, such as Hong Kong, utilize simple tax systems, which have proven effective in attracting investment and enhancing tax competitiveness [5] Tax Design Challenges - The core goal of the "Simplified Tax System" is to create a scientifically simple tax structure with lower tax burdens, but challenges remain, particularly in designing the sales tax [7][10] - Two main design approaches for the sales tax are proposed: "broad tax base with low rates" or "narrow tax base with high rates," with experts suggesting that the former may better suit Hainan's goals of reducing indirect tax ratios and overall tax burdens [7][8] Implementation Challenges - The reform is currently in the research and discussion phase, facing complexities in fiscal revenue distribution and tax coordination between Hainan and other provinces [11][12] - The implementation of the "Simplified Tax System" may lead to increased challenges in tax administration, particularly in managing a dispersed taxpayer base in the retail sector [12] Price Competitiveness and Arbitrage Risks - The introduction of "zero tariff" policies and the "Simplified Tax System" is expected to enhance the competitiveness of domestic goods, but may also widen the price gap between domestic and foreign products, potentially leading to arbitrage activities [13]