China Lowers VAT Rebate Rates for Exports, Including Glass

In a sweeping move, China cut the value added tax (VAT) rebate rates on 2,831 classifications of products, including glass. This represents 37 percent of the total number of classifications in the China customs tariff, point out officials at the consulting firm Ernst & Young, and is the third such change in refund rates since 2005. The company says it is another attempt to address overheating export growth and manage the ballooning trade surplus.

The VAT rebate rate for glass was lowered from 11 percent to 5 percent, a 6-percent drop.

This rate reduction results in additional export costs that must either be absorbed by the exporter or passed on to overseas customers.

Sources in China told DWM that for some glass producers the VAT rebate is the majority of their profit. Speculation is that glass export prices will increase.

Officials with Ernst & Young explain that the VAT refunds have played an important role in keeping export prices low. By changing the VAT refund rates, the government can, to a certain extent, encourage or discourage exportation of the affected products.

The new rebate rate went into effect July 1. Most of the products included in the change fall into the category of high polluting, high energy consumption or export of China's natural resources. The production of glass fits most comfortably into the energy consumption slot.

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