China Raises Rebate On Textile Tax

by Mary Swire, for LawAndTax-News.com, Hong Kong

04 August 2008

Tax rebates on textiles and clothing in China have been given a significant increase, it was announced last Friday, in an attempt to boost falling foreign sales.

The move will ensure that a range of textiles and garments will now qualify for an 13% tax rebate, as opposed to the 11% which was previously in place.

China's Ministry of Finance and State Administration of Taxation announced the decision last week, amid fears that the rising yuan and higher production costs were making it difficult to continue trading with other countries.

The legislation has come into immediate effect.

Beijing had attempted to stem export growth by repealing tax rebates on a number of products, only to cause a spectacular decline in exports.

In light of the decision, Mei Xinyu, a researcher at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce commented to the China Daily news service that:

"The tax rebate hike will give a break to the ailing clothing exporters and help ease the concern over an unemployment spurt."

"But it could be a temporary measure, as the government will continue to push forward the upgrade of its industries."

Insiders from the textile industry have reportedly welcomed the news, and are hoping that it will spell the end of their problems.

"The range of the products benefited from the rebate increase is much smaller than those suffered from the rebate cuts a year ago," Mei told China Daily, going on to conclude:

"It's a clear signal that the government has no intention of encouraging an industry that keeps causing trade tensions in the long run."

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