Official on tax refund adjustment for some export goods

UPDATED: 17:47, June 20, 2007

With the approval of the State Council, or the Chinese central government, the Ministry of Finance, the State Administration of Taxation, the State Development & Planning Commission, the Ministry of Commerce and the General Administration of Customs jointly issued a circular on Monday, or June 18, to adjust downwards tax refund on some export commodities. It specifies that tax refund for some export products will be adjusted as of July 1st, 2007. A Ministry of Finance official Tuesday gave a press interview on the relevant matters on the export tax refund adjustment. The detailed account of the interview is as follows:

Q. What is the main consideration behind the current export tax refund adjustment?

A. Since early this year, Chinese economy has continued to retain a stable, smooth and fast growth, with agricultural production remainly basically stable, industrial structure somewhat improving and financial revenue on sustained rise, and market sales have become increasingly brisk. Meanwhile, the reform and opening-up keeps advancing orderly with a marked rise in the income of both urban and rural residents and more jobless people getting employed. However, there are still some problems in the country's present economic performance, such as an excessive surplus in the external trade, an over-investment growth and an excessive fluidity surplus.

China's total import and export value from January to May, 2007 reached 801.3 billion US dollars, up by 23.7% year on year, according to relevant customs statistics. Of the sum, the total export value amounted to 443.5 billion dollars, up by 27.85% year on year, and the total import value to 357.8 billion dollars, up by 19.1 % year on year; the increase range for export was 8.7 % higher than that of imports, and the accumulated surplus totaled 85.7 billion dollars, up by 83.1% year on year.

The excessive foreign trade surplus gives rise not only to aggravated trade frictions but to bloat domestic fluidity surplus and bring more pressures onto the appreciation of Renminbi (RMB). In order to reduce the excessive trade surplus and spur the balance of foreign trade, the Chinese government has tabled a package of policy measures to step up and improve macroeconomic regulation. The current tax refund adjustment on some commodities represents an important component part of this policy package. It has been aimed mainly to curb the excessive export trade surplus and to alleviate the acute, protruding contradictions resultant from the foreign trade surplus. In the meantime, still greater efforts are being made, among others, to optimize the mix of export commodities, spur the change in the mode of external trade and balance the import and export trade, lessen trade frictions and prompt the transfer of economic growth mode and the sustained socio-economical development.

Q. What are the main contents of the current adjustment for export tax refund policy?

A. The current tax refund adjustment involves a total of 2,831 commodity tiems, or 37% of all the commodities as listed in the tax regulations , and its main contents are made up of three aspects:

First, to further abolish or rescind export tax refund for 553 items of "high energy-consuming, high polluting and resource-type" products, including products of the endangered animal and plant species and related products, salt, dissolvent oil, cement, liquid propane, liquid butane, liquefied natural gas (LNG) and other mineral products, fertilizers, chlorine and dyestuffs and other chemical products (refined chemical products excluded), metal carbide, activated carbon products, leather, some planks and wood-made throwaways, ordinary carbon welded pipes (petroleum casing pipes excluded), non-alloy aluminous-made bar and other simple processed nonferrous metal products and ship sections, and non-motorized ships or boats.

Second, to lower the tax refund for 2,268 items of export commodities that could easily inflict trade frictions, which include chiefly vegetable oil, some chemicals, plastics, rubber and rubber products, suitcases, bags, and other leather and hide products, paper-made articles, garments, shoes and hats, umbrellas, feather goods, some stone material, pottery and porcelain ware, glass, pearls, gem, rare metals and products, some iron and steel products, and other base metals and products, planning and slotting machines, cutters, broaching machine, diesel engine, pump, electric fan, discharge valve and accessories, rotary furnace, coke oven, sewing machine, stapler, golf cart, snowmobile, motorcycle, bicycle, elevator and parts, tap, braze welding machine, furniture, clocks and watches, toys and other miscellaneous goods, some wooden ware and viscose fiber.

Third, to substitute tax exemption for tax refund with respect to the 10 items of export commodities, which mainly include peanut, nut kernel, oil painting, carved and decorated boards, stamps and fiscal stamp.

Q. Is there a transitional policy set for export contracts that had been signed before the promulgation of the new tax refund policy as in last year?

A. In September 2006, the Ministry of Finance and other related government departments co-issued the Circular on Adjusting the Tax Refund Rate of Some Export Commodities and Supplementing the Catalogue of Prohibited Commodities in Processing Trade, which adjusted tax refund on some export commodities. Then, in view of fairly great varieties of commodities with a large scope involved, a three-month transition period was especially prescribed in a bid to reduce losses for the enterprises and ensure the smooth transition of the policy.

In contrast with the practice in 2006, no transition period has been set for the tax refund adjustment this time, nevertheless. The contents of the policy for the current adjustment, however, have been publicized to society at large for some time in advance, so as to provide enterprises with adequate time for preparation.

Q. What effect will the current policy adjustment bring to China's foreign trade?

A. With the current adjustment of the tax refund on some export commodities, the tax refund rate has been adjusted to the five renewed grades of 17%, 13%, 11%, 9% and 5% from the 17%, 13%, 11%, 8% and 5% previously.

To rescind or lower tax refund for some export products will surely increase the costs of China's related export commodities and give scope to a role of containing the over-growth of the country's export trade to some extent.

Therefore, from a long-term point of view, it will facilitate spurring the transfer of the mode of China's economic growth and sustained socio-economic development and thus comply with the long-term interests of the Chinese nation and its people.

By People's Daily Online

People's Daily Online ---