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Reduction in export tax rebate on textiles may lower profits
02 Sep '11
1 min read
Any reduction in export tax rebate on textiles is likely to result in lower profit margins and decreasing bargaining capacity of exporters.
Currently, textile exporters in China enjoy a 16 percent export drawback facility. So, if an exporting firm does not earn any profit on the textiles exported by it, then also it can make a profit of 16 percent, which it gets back as tax rebate. Hence, the reduction in tax rebate would automatically lower the profitability of exporters.
However, overseas buyers also bargain for a pie of the rebate enjoyed by textile exporters. Hence, the reduction in tax rebate would also affect the bargaining ability.
Currently, textile exporters in China enjoy a 16 percent export drawback facility. So, if an exporting firm does not earn any profit on the textiles exported by it, then also it can make a profit of 16 percent, which it gets back as tax rebate. Hence, the reduction in tax rebate would automatically lower the profitability of exporters.
However, overseas buyers also bargain for a pie of the rebate enjoyed by textile exporters. Hence, the reduction in tax rebate would also affect the bargaining ability.
Fibre2fashion News Desk - China
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