China is increasing its “tax rebates” again to subsidize its exports. ”Tax rebates” means value added tax (VAT) rebates. It is a major tool for their penetration of our U.S. market.
While most countries establish general levels of consumption - or value added - taxes, China changes all the time in accordance with their economic strategy. France just increased its VAT to 22% via President Sarkozy. That means we pay 22% tax/tariff going into France and the government writes a 22% check (VAT rebates) to exporters sending widgets to the U.S. Kinda like a tariff and a subsidy. Its cool for them it works both ways.
China is worse. The government adjusts the VAT rebates all the time… to promote or deter exports in a sector or economy wide. They basically have an un-deterred tariff and subsidy system that our USTR and our federal government refuse to acknowledge.
So… see the article below. And remember that “tax rebate” means “VAT export subsidy.”
And for more information, see this CPA White Paper: “How China’s VAT Massively Subsidizes Exports.”
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China to increase tax rebate to exporters - report
Reuters - UK Focus
BEIJING, Feb 21 (Reuters) - China will increase export tax rebates to aid the export sector, which is feeling the punch from the European debt crisis, the China Daily reported on Tuesday, citing the trade ministry.
The Ministry of Commerce, which is in charge of trade policy, said earlier that it had been studying ways to help exporters and that a working conference was held Jiangxi province on Monday to discuss measures to help exporters.
Vice Commerce Minister Zhong Shan was quoted by China Daily as saying that China would increase tax rebates on specific categories of goods including labour-intensive products “at an appropriate time”.
Chinese exports fell 0.5 percent in January from a year earlier, the worst showing since November (Stuttgart: A0Z24E - news) 2009, and China’s trade officials are expecting a “grim” situation going forward.
January exports to the EU, the largest overseas market for Chinese products, fell 3.2 percent year on year.
The export tax policy, which allows exporters to claim refunds on part or all of their domestic value-added tax payments, is often used as tool to help the export sector.
At the end of 2008, when China’s export machine was grinding to halt amid the global financial crisis, Beijing increased tax rebates on nearly a quarter of its products, including shoes, furniture and machinery. The average rebate ratio was increased to 13.5 percent in 2009 from 9.8 percent before the crisis.
Many labour-intensive products, including textiles, are covered by a 16 percent export tax rebate ratio, close to the up limit of 17 percent.
China uses different tax rates for different products to discourage overseas sales of energy-intensive and polluting products. For example, rebates for some low-end steel products were halted. (Reporting by Zhou Xin and Nick Edwards; Editing by Chris Lewis)
Thank you, Mr. Stumo. Good catch.