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Opinions differ if higher VAT helps
Source: Xinhua |
January 3, 2009, Saturday
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Print Edition
Print Edition
A higher value-added tax on 82 mineral products became effective on Thursday and while producers welcomed the policy, analysts are uncertain whether the new tax rates would bolster the sector.
China raised the VAT on minerals two months ago to ease the burden of producers. The VAT rate for such mineral imports as copper ore, nickel ore, aluminum ore as well as ore concentrates was raised to 17 percent from 13 percent, according to the Ministry of Finance and the State Administration of Taxation.
The two agencies said the new rates will cover ferrous and nonferrous metals as well as non-metal minerals. The rate for salt would remain unchanged at 13 percent.
"The 4 percentage point increase is an adjustment of a big margin," a source, who preferred to remain anonymous, inside Henan Yuguang Gold and Lead Co said. The source added that the company would be able to save a large amount of money it would have spent on the taxes and will therefore be able to reduce costs. Thanks to the higher VAT rates, such firms will be able to deduct a larger amount of taxes paid for ore imports when they sell final products.
Jiang Ning, an analyst at Shanghai-based nonferrous metals Website (www.smm.com.cn), said it was too early to tell if the nonferrous metal sector would perform better.
Nonferrous metal producers have posted all-round losses after prices fell by 20 to 46 percent in the last few months. Some producers were forced to suspend production to avoid further losses.
According to the National Bureau of Statistics, profits of the nonferrous metal and processing industry fell 34.1 percent year on year in the first 11 months of 2008.
Jiang forecast the nonferrous sector to be weak in the first quarter of this year.
In addition to higher VAT rates, the State Reserve Bureau, which maintains stockpiles of key raw materials, was reported to be discussing a purchase of 300,000 tons of aluminum at a premium price from producers. The move is aimed at increasing prices and supporting producers.
Jiang said if that happens, such a move would only be effective in the short term and was not enough to change the long-term trend. He added that the biggest problem for nonferrous metal producers was insufficient demand after a global financial turmoil slashed demand worldwide.
China raised the VAT on minerals two months ago to ease the burden of producers. The VAT rate for such mineral imports as copper ore, nickel ore, aluminum ore as well as ore concentrates was raised to 17 percent from 13 percent, according to the Ministry of Finance and the State Administration of Taxation.
The two agencies said the new rates will cover ferrous and nonferrous metals as well as non-metal minerals. The rate for salt would remain unchanged at 13 percent.
"The 4 percentage point increase is an adjustment of a big margin," a source, who preferred to remain anonymous, inside Henan Yuguang Gold and Lead Co said. The source added that the company would be able to save a large amount of money it would have spent on the taxes and will therefore be able to reduce costs. Thanks to the higher VAT rates, such firms will be able to deduct a larger amount of taxes paid for ore imports when they sell final products.
Jiang Ning, an analyst at Shanghai-based nonferrous metals Website (www.smm.com.cn), said it was too early to tell if the nonferrous metal sector would perform better.
Nonferrous metal producers have posted all-round losses after prices fell by 20 to 46 percent in the last few months. Some producers were forced to suspend production to avoid further losses.
According to the National Bureau of Statistics, profits of the nonferrous metal and processing industry fell 34.1 percent year on year in the first 11 months of 2008.
Jiang forecast the nonferrous sector to be weak in the first quarter of this year.
In addition to higher VAT rates, the State Reserve Bureau, which maintains stockpiles of key raw materials, was reported to be discussing a purchase of 300,000 tons of aluminum at a premium price from producers. The move is aimed at increasing prices and supporting producers.
Jiang said if that happens, such a move would only be effective in the short term and was not enough to change the long-term trend. He added that the biggest problem for nonferrous metal producers was insufficient demand after a global financial turmoil slashed demand worldwide.
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