Abstract: Since April 1, 2019, China has carried out a universal large-scale reform of value-added tax (VAT), including the reduction of the VAT rates and 10% additional deduction of amount payable on input VAT for the four major industries of postal service, telecommunication service, modern service and residents' life service. This paper takes 2018 value-added tax system as reference and constructs a 42-department VAT CGE model to conduct a simulative measurement of the policy effect of China's VAT reduction reform in 2019 from the four aspects of tax burden, economic growth, income distribution and social welfare. The findings show that both lowering tax rates and 10% additional deduction policy can effectively reduce the tax burden on the enterprises, stimulate economic growth, expand social demands, lower commodity prices, narrow the internal income gap between urban and rural residents and improve social welfare. Therefore, the four major industries, such as the modern service industry and so on, should grasp the rare policy opportunity of the additional deduction of input tax and make sufficient use of the tax incentives to realize the leapfrog development of the modern service industry and promote the optimization of China's economic structure and industrial upgrading.

Key words: value-added tax, tax deduction reform, policy effect, tax revenue effect, tax economic effect