Core Viewpoint - The announcement to reinstate VAT on interest income from newly issued government bonds and financial bonds starting August 8, 2025, raises questions about its net impact on government revenue and expenditure, suggesting that the effects are not neutral as many investors believe [4][9]. Group 1: Economic Implications - The policy is expected to increase both government revenue from VAT and interest expenditure on new bonds, indicating a simultaneous rise in both aspects [4][9]. - Viewing the situation from a cyclical perspective, the policy could enhance internal circulation, benefiting both government and the real economy through increased tax revenue and interest income [9][18]. Group 2: Theoretical Framework - The concepts of monetary neutrality and Ricardian equivalence are introduced to analyze the effectiveness of fiscal policies, suggesting that in reality, these policies do have significant impacts despite theoretical assumptions [10][17]. - The discussion emphasizes that market participants often lack the rationality required to fully understand the long-term implications of such policies, leading to misinterpretations of their neutrality [18][19]. Group 3: Internal Circulation and Inflation - The relationship between nominal wages and inflation is explored, indicating that increases in nominal wages can enhance internal circulation by raising both wage expenses for businesses and income for households [20][23]. - The article argues that the long-term low CPI in the domestic market is a result of systemic issues across various economic factors, including tax policies [26][30]. Group 4: Policy Signals - The reinstatement of VAT on government bonds signals a potential increase in the likelihood of canceling other tax exemptions and subsidies, particularly on government bond income tax [28][40]. - The discussion highlights the need for a systemic approach to understanding the factors contributing to internal economic challenges, rather than focusing on isolated elements [30][49].

Group 1 - The announcement from the regulatory authority indicates that starting from August 8, 2025, interest income from newly issued government bonds, local government bonds, and financial bonds will be subject to value-added tax, while those issued before this date will continue to be exempt until maturity [1][2]. - Investors express confusion over the policy, noting that the removal of tax exemptions will increase the new issuance rates of government bonds, thereby raising government interest expenses, while simultaneously increasing government VAT revenue, leading to a perceived net effect of zero [2][3]. - The article emphasizes the importance of the economic process, suggesting that the dynamics of economic activities are more significant than the static outcomes [4][6]. Group 2 - The policy is viewed as a means to expand the internal economic cycle, with both tax revenue and interest expenses increasing from the government's perspective, and interest income and tax expenditures rising from the perspective of the real economy [6][12]. - Two significant economic concepts are introduced: the neutrality of money and Ricardian equivalence, which explore whether changes in nominal amounts affect real economic outcomes [7][11]. - The article argues that in reality, neither monetary policy nor fiscal policy is neutral, as market participants often lack the rationality and foresight assumed in economic theories [14][12]. Group 3 - The restoration of VAT on government bond interest signals a potential increase in the likelihood of canceling other tax exemptions and social subsidies, particularly the 25% income tax on government bonds [29][40]. - The discussion highlights that the factors contributing to long-term low CPI are systemic and multifaceted, with fiscal policies playing a significant role [25][26]. - The article suggests that the government has two options regarding bond interest: to either keep it low to suppress domestic prices and stimulate exports or to raise it to enhance nominal prices and expand the internal cycle [27][28].