Editor’s note: On December 31, 2014, the Ministry of Finance and the State Administration of Taxation issued a notice to increase the export tax rebate rate for some products. Some textile and clothing products are among them, from 16% to 17 %. In sharp contrast to the rapid growth of exports in October 2014, my country’s textile and apparel exports fell by 0.5% year-on-year in November 2014. This was the second negative growth in the year except February. Affected by this, my country’s cumulative export growth dropped from 6.4% in October to 5.7%. Under this circumstance, the increase in the export tax rebate rate caused considerable fluctuations in the industry. Some companies are rejoicing, but many others believe that a one-point increase is insignificant to overall export operations. But in the final analysis, 1 percentage point is not a life-saving straw. The more significance is that it sends a signal-the country encourages exports and supports the development of labor-intensive industries. What does it mean to achieve a 1 percentage point increase in the export tax rebate rate? What effects can it bring to industries and enterprises? We explain it in detail here.
Experts explain why the increase
Zhang Xian, Secretary-General of China Chamber of Commerce for Import and Export of Textiles:
Improving tax refund efficiency is equally important
Reporter: How does the China Chamber of Commerce for Import and Export of Textile Products view the increase in export tax rebate rates for some textile products?
Zhang Xian: The country’s increase in the export tax rebate rate this time should be said to be the country’s efforts to help enterprises promote exports in the face of the severe external market environment. From the data analysis in 2014, it can be seen that the overall export situation of textiles and clothing is relatively severe. Especially the data for November showed not only no growth but also a decline, which made the industry and companies panic.
In fact, in order to promote exports, the national level has tried its best to provide convenience to enterprises. For example, relevant departments have implemented and solved the trade facilitation issues that enterprises are most concerned about, simplified procedures, and reduced testing and customs declaration costs. In addition, the government has also strengthened the management of tax refund efficiency and made the tax refund mechanism more standardized. Many companies have reported that these measures have been implemented with great intensity and have truly benefited them. However, as the flexibility of the RMB exchange rate increases, there are ups and downs, and the textile and apparel export industry’s full-year performance is lower than expected. In this case, there is no other way but to adjust the export tax rebate rate.
Reporter: What does a 1 percentage point adjustment mean to the industry?
Zhang Xian: It may not have much practical significance to the enterprise. Can a 1 percentage point increase in the export tax rebate rate attract customers and prevent orders from being transferred? This may not be possible. After all, competition in the international market is fierce and domestic labor costs are rising. However, this move reveals a signal that the country still attaches great importance to labor-intensive industries such as textiles and clothing. When domestic and foreign markets are in trouble, this can appropriately stimulate the market. In addition, while companies pay attention to changes in export tax refund rates, they should also pay attention to our improvements in tax refund management and efficiency. The efficiency is improved, the review time is shorter than before, and the company’s capital turnover can also be accelerated.
Reporter: Which categories can increase the export tax rebate rate? What is the basis for judgment?
Zhang Xian: It should be noted here that as to which categories can achieve a 17% tax rebate, the China Chamber of Commerce for Import and Export of Textile Products conducted careful investigations before filing and communicated with a large number of companies, and finally reported most of the textile products. . After the specific news was released, after verification, we found that there was no difference between the approved projects and the declared projects. This shows that except for cotton and some silk, cocoon and other products, most textiles can currently enjoy the increase in export tax rebate rates.
Reporter: It has been more than five years since the last adjustment. Will there be any changes in the export tax rebate rate in the near future?
Zhang Xian: The export tax rebate rates for most textiles and clothing have now reached the upper limit, which shows that the country is very concerned about the textile and clothing industry and has a sense of crisis for textile and clothing exports. The adjustment after more than five years is a judgment based on the current situation. It can be seen from the export growth data in the past five years that the export situation of textiles and clothing is relatively stable and has maintained low growth.
Liu Shangxi, Director of the Institute of Fiscal Science of the Ministry of Finance:
Businesses should not rely too much on tax refunds
Reporter: What is the purpose of the Ministry of Finance and the State Administration of Taxation to increase the tax rebate rate for some textile products to 17% this time?
Liu Shangxi: My understanding should be to promote exports and stabilize industrial growth.
Reporter: The last adjustment was in April 2009, which was nearly 6 years ago. The interval between the two previous adjustments was only 2 months. Why is this?
Liu Shangxi: Each adjustment range is determined according to the situation at that time, and there is no special regularity. When and how much the export tax rebate rate will be adjusted for the textile and apparel industry will be determined based on the development of the industry. For example, from 2008 to 2009, my country adjusted the export tax rebate rate for textiles and clothing three times in a short period of time, all based on the specific conditions at that time. The current export situation of our country’s textile and apparel industry is not very good. In view of the need to stabilize growth, the Ministry of Finance and the State Administration of Taxation made such adjustments this time.
Reporter: This timeproduction and sales. The decline in textile and apparel exports will cause a series of social problems such as employment. I believe that improving product competitiveness is the only way out for China’s textile and apparel industry and enterprises. Relying on price subsidies for buyers by increasing the tax rebate rate will eventually turn into a competitive war between Chinese enterprises. ”
The secret of data penetration and improvement
What does it mean to go from 16% to 17%?
Cost price × export tax rebate rate = tax refund amount
When the export tax rebate rate is 16%
1 US dollar (6.1 RMB) × 16% = 0.976 RMB
When the export tax rebate rate is 17%
1 US dollar (6.1 RMB) × 17% = 1.037 RMB
1.037 yuan – 0.976 yuan = 0.061 yuan RMB
The cost price of 1 US dollar can provide an additional tax rebate of approximately RMB 0.061.
