Chinese Chip Makers Enjoy Unfair Tax Advantage, Says SIA

by Leroy Baker, Tax-News.com, New York

30 October 2003

In a study released on Tuesday, the US-based Semiconductor Industry Association (SIA) criticized the Chinese government’s VAT (Value Added Tax) policy with regard to the country’s emerging semiconductor industry, which the SIA concludes is discriminatory and distorts the market.

“The SIA supports open markets for all semiconductor products thus providing the consumer access to the best technology and the most competitive pricing from semiconductor companies throughout the world,” explained SIA President, George Scalise, adding that the “SIA has discussed this matter on several occasions with the US Government, and the Chinese Government and industry. We will continue to raise this issue and we’re hopeful it can be resolved quickly and amicably.”

“The SIA supports the US Government bilateral efforts with China to eliminate the discrimination against imported semiconductor devices created by the implementation of its VAT,” Scalise concluded.

According to the report, China is currently the most rapidly growing semiconductor market, and ranks as the world’s third largest market with $19 billion in sales. The SIA also noted that a host of other tax incentives are in place to help foster the Chinese market, including income tax holidays for domestically located factories and incentives for individuals, manpower and education programs.

Whilst the SIA does not criticize industrial promotion efforts by the Chinese government in general, it argues that China can best develop its economy and abide by trade rules by lowering both VAT on imports as well as domestically produced semiconductors.

The SIA points out that at present, China provides VAT rebates in excess of 3% on semiconductor products produced and sold within the country, although it charges VAT at the full 17% rate on imported semiconductor products. “GATT Article III on National Treatment prohibits a WTO member country from engaging in activity that treats domestic producers and products more favorably than imported products,” noted Scalise.

Recommended