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MOF abolishes value-added tax on fresh vegetables to ease inflation

By Li Qiaoyi (Global Times)

09:45, January 10, 2012

The country's fresh vegetable sellers have gained exemption from a 13-percent value-added tax starting from January 1 this year, the Ministry of Finance (MOF) announced Monday, as the government continues efforts to allay inflationary pressures. But an analyst said it would not contribute to a big drop in farm produce prices.

Wholesale and retail sellers of vegetables, except for canned ones, have been exempted from the value-added tax during the distribution process, the MOF said in a statement posted on its website Monday.

The decision comes after a statement by the State Council, the country's cabinet, last month that the value-added tax on vegetables could be eliminated to reduce distribution costs.

The tax break can help lower costs especially of wholesale vegetable traders, and benefit consumers who ultimately have to pay for the value-added taxes, Xu Hongzhi, manager of analysis department at Beijing Orient Agribusiness Consultant, an agriculture consulting firm, told the Global Times Monday.

The move is expected to amount to tax savings of about 15 billion yuan ($2.38 billion) during the distribution process, the China Taxation News, a newspaper run by the State Administration of Taxation, reported Monday, citing estimations from unnamed authoritative departments.

"The value-added tax burden, in addition to rising costs of production and distribution, has contributed to the rise in vegetable prices over the past two years, and the tax exemption would have an impact on vegetable prices," Xu said, while noting that the prices would not see an immediate drop due to the cold weather and upcoming Chinese Lunar New Year holidays.

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