Shortly after the Chinese Premier Wen Jiabao called for immediate reform of the existing export tax rebate system last weekend, the State Council released a circular Monday, illustrating the details of tax rebate reform.
The main adjustments include:
- A moderately lower tax rebate rate. Under the principle of moderation, safety and feasibility, the adjustments should be made considering the difference of export products. The rate for these exports encouraged by government will be kept unchanged or slightly cut, while that of common products will be moderately lowered. The tax rebate of those restricted by government and some resource-related products will be sharply cut, even cancelled.
- Strengthen the support from central finance. From 2003, the increment of export value-added tax and consumption tax will be firstly used for export tax rebate.
- Set up a new system which asks both central and local governments to refund tax. From 2004, to take the actual tax rebate volume in 2003 as the benchmark, central and local governments respectively pay the 75 percent and 25 percent of the amount which surpasses the benchmark.
- Push forward the reform of a foreign trade system, and adjust the industrial structure of China's exports. Through the improvement of related laws, government strives to boost the export of manufacturing enterprises and give instructions to foreign trade agents. Exporters also aim to lower costs of export products, and further enhance their international competitive ability. Meanwhile, they try to optimize the industrial structure of export products and improve their earnings.
- Central government will refund all tax rebates it owes exporters before the end of 2003, and shoulder local fiscal losses caused by the former value-added tax system. From 2004, it also will refund outstanding payments through interest subsidies.
The details of tax rebate rate are as follows:
I. The tax rebate rate of farm produce, now 5 percent or 13 percent, will remain unchanged.
II. For products like ships, automobiles and its key parts, numerically controlled machine tools, combined machine tools, hoisting machinery, mechanical lift equipment, construction and mining machinery, program-controlled telephone, telegraph exchange, optical telecommunication equipment, medical equipment, locomotive, portable automatic data-processing machine, metallurgy equipment, aerospace vehicle, printing circuit, their current tax rebate rate of 17 percent will remain unchanged. The rates of some machines, clothing and textiles will be lowered to 13 percent.
III. For products like steel, hardware, industrial chemicals, plastic products, toys, shoes, watches, pottery, chemical fibers, rubber products, sports products, leather, traveling products and suitcases, their existing tax rebate rate, now 15 percent, will be lowered to 13 percent.
IV. For products with 13 percent tax rebate rate, mainly coal and fertilizer, the rate will be lowered to 11 percent.
V. Abolishment of the tax rebate policy on some resource-related products, including concentrates, crude oil, logs, coniferous wood, throwaway chopsticks, cork and cork related products, wood pulp, cardboard, paper pulp, cashmere and eel fry. For these above-mentioned products which have consuming tax imposed on them, its rebate of consuming tax will also be cancelled.
VI. The tax rebate rate of some resource-related products will be lowered to 8 or 5 percent. These products which enjoy 8 percent tax rate include Aluminium, phosphorus, molybdenum, nickel and ferroalloy, while these with 5 percent rate include copper, coking coal and coke.
These adjustments will take effect as of January 1, 2004. More details are available on the websites of the Ministry of Finance, State Administration of Taxation and Ministry of Commerce.
(China.org.cn by Tang Fuchun October 17, 2003)
