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Tax Rebate Timetable Agreed

The central government, which decided in October to cut the tax rebate rate and promised to cover the owed rebates to exporters, has formulated a payment timetable, according to a senior tax official.

The official said on the condition of anonymity that all the tax rebates owed before the end of 2002 will be paid off by Thursday.

"For those from last year, exporters based in central and western China will be paid before April 15 and companies in the eastern China will get the money by the end of May," the official said.

Tax rebates are common in international trade. Governments usually return value-added and consumption taxes to export-oriented companies for their products sold abroad.

The government announced in October that it would cut the tax rebate rate by an average of 3 percentage points beginning from January 1 this year. At the same time, it also promised to pay off all the owed rebates before the change because government finances were not well prepared for unexpected soaring exports in recent years.

The rebates owed by the end of 2002 totaled 247.7 billion yuan (US$29.9 billion). The figure in 2003 was more than 50 billion yuan (US$6.04 billion).

Analysts have speculated whether and how the central government would fulfill its commitments to pay off such a huge amount.

But the official said it is achievable, as the government will streamline its fiscal spending. "The government is also studying another way, which will be decided soon," he said.

This corroborates a market guess that the government is considering sourcing the funds by issuing special treasury bonds.

Long Guoqiang, an expert from the Development and Research Center under the State Council, who is in favor of such bonds, said the bond issuing will give the government more time rather than paying immediately.

He appreciated the government's move to give such a concrete timetable and pay off in such a short time.

"The efficient rebate-payment process will be a trade-off to exporters," he said.

The refund will strengthen the cash flow of exporting companies, who are believed to experience a negative but limited impact from the rate cut.

Liu Mingxin from an export company based in Central China's Henan Province said the company has got the refund owed before the end of 2002 totaling 200,000 yuan (US$24,163).

"But we are still worrying whether we can get timely refund from the local government," he said.

The rebate reform announced in October said the central government would be responsible for rebates happened before the end of 2003. But for the refunds happened after the change, the central and local governments will split the burden of by a proportion of 75 percent to 25 percent.

According to the refunding procedure, if the local government does not pay the 25 percent, the companies will not be paid by the central government, he explained.

(China Daily January 14, 2004)

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