China To Overhaul Export Rebates As Output Booms

by Mary Swire, Tax-News.com, Hong Kong

29 August 2003

The Chinese government is set to revamp its export tax rebate system as the increasing success of the country's export manufacturing industries outstrips the government's ability to finance the scheme.

According to reports from the region, the value added tax rebate on exports will be reduced from 15% to 11%, and certain classes of goods and commodities will be excluded from the rebate system altogether, such as those where China has a competitive edge in the world marketplace, and in the case of goods that damage the environment in the course of production.

The government is expected to hurry through the changes in order to keep the total cost to 300 billion yuan in export rebate payments this year, up from 248 billion yuan last year. This is on top of a forecast budget deficit of 320 billion yuan in 2003. The new proposals are expected to save the government some 60 billion yuan a year.

Illustrating the size of the problem in the export rebate system, the volume of Chinese exports has jumped 34% in the first half of this year alone.

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