Chinese government to announce export tax rebate policy

SteelOrbis Shanghai Chinese government hinted that it would reduce the tax rebate on steel product exports to 5 percent from the current 11 percent. According to people who are close to officials in Commerce Ministry, the Ministry of Finance and the State Taxation Bureau set up documents, which are awaiting comments from the National Development and Reform Commission (NDRC). The document set up by the Finance Ministry does not mention the issue of lowering the export tax rebate. It only stresses the necessity of a policy to restrict the exports of high energy consuming, high polluting and low value added products as well as the resource products. However, the document from the State Taxation Bureau mentions that the export tax rebate would be reduced to 5 percent from the previous of 11 percent for all the steel products. Accordingly, the government will also impose a 17 percent VAT on the steel imported for processing and re-exporting, and then return 5 percent VAT during the export. That means a 12 percent VAT will be imposed on such products, in order to cool down the imports. Steel imported for processing and re-exporting accounts for 50 percent of China's total steel imports. According to the current policy, some companies do not pay any VAT at all and the others receive rebate for the entire VAT they paid during their exports after processing. Based on the current ex-factory prices, the 6 percent decrease in export tax rebate means the cost of steel exports would increase more than RMB 250/mt ($31). The new policy may cause pressures on domestic markets which require the support of exports. Nevertheless, the international market trend will be the chief factor to determine the influence on domestic prices. The two documents are awaiting NDRC's comments, and neither of them mentions any imposition of tax on semi finished steel exports. It is said that according to normal working procedures, the formal documents would be announced on May 25 or so. However, May 15 or the end of this month seems more suitable to announce a new policy.