| China likely to increase tax rebate quota
2003-06-17
China Daily
China is likely to increase its tax rebate quota by between 20 billion yuan
and 30 billion yuan (US$2.4 billion to US$3.6 billion) this year to encourage
exports, experts said.
A Ministry of Finance official said the ministry is working on a plan to
increase the quota for this year.
The State Council must later approve the plan before it is put into practice,
the official said.
Niu Li, a senior economist with the State Information Center, said: "This is
a piece of good news for export companies, which have been facing increasing
difficulties since the SARS outbreak."
The country's tax rebate quota for this year is about 129 billion yuan
(US$15.5 billion), which would be about 100 billion yuan (US$12 billion) less
than the real demand if exports grow by only 10 percent, he said.
Ni Hongri, a senior research fellow with the State Council's Development
Research Center, said the current fiscal situation made it possible for the
country to increase the rebate quota by 20 billion to 30 billion yuan (US$2.4
billion to US$3.6 billion).
The fiscal situation for the first four months of this year has been
surprisingly good, featuring the highest revenue growth and lowest increase in
expenditure since 1998, Ni said.
By the end of April, the increased fiscal revenue reached 167.5 billion yuan
(US$20.2 billion), well above the 158.7 billion yuan (US$19.1 billion) in
increased revenue that the budget set aside for this year.
Tax rebates are common practice in international trade. The government
usually returns value-added tax and consumption tax to export companies that
sell products abroad to increase these companies' competitiveness.
But the Chinese Government has failed to pay the rebate promptly to export
companies during the past several years because the country's fast growing
foreign-trade business brought about demand for more tax rebates than the quota
set at the beginning of each year.
Reliable sources said that, by the end of last year, the delayed payment of
tax rebates reached more than 247 billion yuan (US$29.8 billion).
Tax refunds for last year and this year went largely unpaid to export
companies in several major provinces and municipalities.
For some companies, tax rebates accounted for 70 to 80 percent of their
profits, Niu said.
"The delayed payments have created enormous difficulties for companies'
business activities and are harmful to exports," he said.
Long Guoqiang, another research fellow with the Development Research Center,
said the delayed payment of tax rebates has become a problem of hidden debt in
China's finance industry.
Some foreign-trade companies suffer from a lack of floating capital because
of the delay in tax rebate payments. To deal with this, the relevant government
departments have agreed that these companies can borrow from banks by showing
their refund certificates.
"This will have a negative impact on commercial banks' business and possibly
increase these banks' non-performing loans," Long said.
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