Abstract: Optimizing the value-added tax (VAT) system is one of the most important elements in building a modern tax system in the new era. In this regard, based on the typical facts of Chinese-style VAT modernization, this paper examines the functional changes in the process of institutional changes, and explores the proper positioning and optimization direction of the VAT law in the new era by integrating the external tax structure with the internal institutional design. At present, striking a balance between central financial control and local government incentives has always been the core issue in the design of China's VAT law. In the face of the constraints of the early reform and opening-up period, the reconstruction of China's compound tax system must rely on the turnover tax represented by the VAT. In the process of balancing local financial power and central control, the effectiveness of VAT in promoting the centralization of tax power has been amplified and strengthened, and eventually a compound tax system with VAT as the main body has been developed. Under the current tax structure, in order to stabilize local financial resources and maintain central financial control, it is necessary to continue to rely on the tax power concentration of VAT, so as to realize the modernization of Chinese-style VAT. In view of this, China's VAT law should be shifted from“sharing before centralization”to“tax collection before sharing”, with the specific design in the following directions: VAT needs to be fully adjusted towards the centralized tax position, continue to be taxed according to the principle of the place of production, and finally be divided among local governments according to the level of consumption.

Key words: Chinese-style modernization, value-added tax, centralization of tax power, central and local fiscal relations, central tax power