New tax rebate policy will help exports

Measure aids trade growth and SMEs to better tap global market, say insiders

A new policy to allow trade service companies to apply for tax rebates or exemptions for export goods will help expand trade growth and encourage domestic small and medium-sized enterprises to better tap the international market, industry insiders said.

Trade service companies will be allowed to apply for tax rebates or exemptions after they sign contracts with small and medium-sized enterprises to sell goods to the overseas market, according to the policy introduced by China's top taxation watchdog.

"The policy represents a big change in China's export taxation reform. It means that export rebate businesses could be outsourced to trade service companies," said Xiao Feng, deputy general manager of Shenzhen Onetouch Business Service Co.

The policy, which was issued by the State Administration of Taxation early last month, is scheduled to take effect on Tuesday.

In the past, the country's taxation authority adopted a very cautious approach toward the tax-rebate business conducted by service-trade companies, especially after some agencies were found to play roles in tax fraud cases in recent years.

The rising momentum in China's foreign trade in the first half of last year also raised suspicions that companies may have misreported exports to obtain tax rebates, prompting authorities to create a series of new rules to check trade flows.

According to the new policy, service trade providers are only allowed to apply for a tax rebate after being granted the right by SMEs to sell goods in the overseas market.

"As a service trade company, we will provide efficient service for domestic companies to better tap the international market and reduce export costs," Xiao said.

Shenzhen Onetouch Business Service Co, one of the leading online trade service companies based in the Pearl River Delta region, helped exporters to win tax rebates worth 2.3 billion yuan ($371.1 million) in 2013, company sources said.

Sources with the taxation administration said China granted export rebates or exemptions of 838.83 billion yuan to enterprises during the first 10 months of 2013, after the tax authorities streamlined the procedures for export rebates to help foreign trade enterprises tide over difficulties.

"Chinese manufacturers are still facing difficulties as they lose their traditional competitive edge in pricing because of higher production and labor costs, intensifying competition and the fluctuation of the yuan exchange rate," said Xiao.

China's exports were down by 18.1 percent year-on-year to $114.1 billion in February, the biggest decline since the global financial crisis in 2008, according to the General Administration of Customs.

"Under the current trade situation, Chinese exporters need more efficient services to make profits to ward off the negative impact brought about by a decreasing overseas demand for Chinese goods," Xiao said.

Following the new policy, Xiao expects more manufacturers, especially small and medium-sized ones, will have more confidence to ship goods overseas.

"More tax rebates will be granted through the service trade platform because there will be more exporters looking for services to ward off declining business. The policy will help boost trade growth," Xiao added.

Zhang Xingming, general manager of Huidong Youme Shoes Factory, spoke highly of the trade service of helping SMEs to gain export tax refunds.

"For us small exporters it usually requires increased labor costs to qualify us to apply for the tax rebate by ourselves," said Zhang.

In the past, a company had to wait for at least three months to be finally refunded by taxation authorities for a single business trade, according to Zhang.

The new policy will help ease the rising workload burden for the government because there are more Chinese manufacturers shipping products overseas, said Wang Jian, a professor with the Beijing-based University of International Business and Economy.

"Global trade has greatly changed following the boom in e-commerce development. The fast-developing trade demands a more efficient public service," Wang said.