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Increase in rebate prescription for symptom, not disease - Experts
Oct '08
The Ministry of Finance and the State Administration of Taxation has issued a notice to raise export tax rebate rate after due approval by the State Council. Export tax rebate rate on textiles and clothing will be increased from 13 percent to 14 percent, from November 1, 2008.

Experts aver that increased export tax rebate rate has both advantages and disadvantages Pointing to the advantages they say that in such an adverse international environment, it is estimated that the entire industry will get affected and incur huge losses.

This will lead to a large number of lay-off amongst workers and lead to social problems, which is not conducive to social harmony. There are estimated to be 6,074,453 workers working in the textile industry and 4,019,235 workers in the apparel, shoe and hat manufacturing industry.

From this point of view, the introduction of policies to save the textile and garment industry is a matter which the government could not have put off for a longer period. But one percent increase of export drawback rate is less than expectation in the proposals submitted by the textile Industry Council and the Ministry of Commerce, as it can only produce limited benefit, say industry analysts.

At the same time, the increase of export tax rebate is not going to prove helpful to eliminate non-competitive businesses and also not conducive to upgrade the ongoing industrial structure. Foreign buyers in turn will demand lower prices leading to reduced profits for exporters so the overall benefit supposed to accrue will not be there.

So experts say, the one percent increase of export tax rebate is only a prescription that treats the symptom but not the disease of the textile and garment industry. Simply said, one percent increase of export tax rebate rate will directly add one percent of total export revenue to the total amount of business profits.

Assuming that textile and garment exports grow by about 10 percent in 2008, and increase by 2 percent in 2009, in accordance with the RMB exchange rate of 6.7 against one dollar, the one percent increase in export tax rebate will help the textile and garment industry gain a net profit of Yuan 541 million in 2008 and Yuan 6.62 billion in 2009.

Fibre2fashion News Desk - China

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