SIA Calls On China To End VAT Discrimination On Imported Chips

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

20 May 2004

The US Semiconductor Industry Association has called upon the Chinese government to bring about an early end to the pending US-led complaint at the WTO concerning tax discrimination.

China presently imposes a value added tax of 17% on sales of all imported and domestically produced semiconductors, but rebates the amount of the VAT burden in excess of 3% for semiconductors produced in China.

George Scalise, president of the SIA, noted that:

“The discriminatory tax on imported semiconductors remains in effect. The multilateral consultations with other interested parties offer an excellent opportunity for China to take early action to eliminate the discrimination on imported semiconductor products as required by WTO rules.”

According to the SIA, China’s discriminatory application of value added tax is severely and unfairly skewing investment patterns, as semiconductor manufacturers seek to avoid the heavy burdens on imported chips.

The action by the United States government at the WTO is being supported by Japan and the European Union, who may participate in the proceedings as ‘third countries’.

The SIA also has the support of the World Semiconductor Council, representing manufacturers from the United States, Europe, Japan, Korea and Taiwan, which has called on China to reduce the level of VAT on semiconductors to 3% regardless of origin.

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