Friends, starting from April 1st, the export value-added tax rebate for photovoltaic products will be officially canceled and returned to zero.
The value-added tax export rebate in the battery field has been postponed for one year. This time it will be reduced first and then completely canceled next year.
You know, photovoltaics and lithium batteries are the main forces of our current foreign trade exports. Why is the policy adjusted like this?
Will the export tax rebate policy completely withdraw from the stage of history in the future?
Let’s analyze it together.
To understand today’s changes, we first understand how export tax rebates come from.
This policy was formally established in 1985. The core logic is to refund the domestic value-added tax and consumption tax paid on exported goods to achieve zero tax burden on exports.
The essence is to avoid double taxation at home and abroad and improve the competitiveness of our export products in overseas markets.
If you think about it, if a product is sold domestically, it has to pay value-added tax, and when it is sold abroad, it has to pay again. The price of double taxation will be high and the competitiveness will be weak.
A common practice internationally is for exporting countries to refund the value-added tax paid on goods domestically, allowing products to participate in international competition at tax-free prices.
For example, when our cars are exported to Europe, local consumers will pay VAT. If we exempt the domestic VAT, we will only levy the tax once and will not be taxed twice.
The same applies to our imported foreign cars. This is the recognized principle of taxation at the place of consumption under the WTO framework.
But the United States is an exception. Because there is no value-added tax at the federal level, there is no tax refund for exported goods from the United States.
Trump often uses this as an excuse, saying that our American companies do not have subsidies for exporting their products abroad, but you also subsidize taxes.
In fact, he doesn’t understand the differences in tax systems at all.
The United States mainly relies on personal income tax, property tax, and social security taxes and fees linked to wages. There is no national unified value-added tax. Only individual states have it, but overall there is no federal tax.
So he often talks nonsense sometimes, and we have to find opportunities to teach Trump a lesson on this.
How much role has the export tax rebate policy played in the past 40 years?
Except for a few high-energy-consuming and high-pollution industries, most manufacturing export products, from textiles and clothing in the early days to mechanical and electrical products later, to the “three new items” that have attracted much attention in recent years, have almost all enjoyed the benefits of this policy.
The total annual export tax rebate has soared from 1.98 billion yuan in 1985 to about 2 trillion yuan today.
The scale has increased 1,000 times in 40 years, and it has also made great contributions to establishing China as the world’s factory and a global manufacturing power.
Moreover, the state also encourages the export of high value-added products by setting different tax rebate rates for the export of different categories of products, restricts the export of products with “two highs and one capital”, and guides the continuous adjustment and optimization of the industrial structure.
Some friends asked, since it has played such a big role in history, why is it being phased out now?
The reason is also very practical.
The first reason is anti-involution.
When our industry was still weak, we did need tax rebate policies to help us get started, but now many industries have grown and developed. For example, the photovoltaic industry accounts for more than 80% – 90% of the global market, or even higher. We have absolute cost advantages and technological advantages, and we no longer need to rely on tax rebates to maintain our competitiveness.
On the other hand, if the tax rebate policy is maintained, it will turn into vicious competition that is internalized and externalized. In order to grab orders, some companies will export with zero profit or even a loss, and they will rely on export tax rebates to support them.
This is equivalent to giving the export tax rebate dividend to overseas consumers in disguised form, but the financial subsidy for the export tax rebate is shared by domestic taxpayers.
The second reason is to ease trade frictions.
Some countries in Europe and the United States have been accusing us of overcapacity and subsidizing exports, and actively reducing our policy intervention is actually a target for reducing anti-dumping investigations.
The last reason is to relieve financial pressure.
Tax rebates of nearly 2 trillion yuan a year account for about 9% of the country’s general public budget revenue, which is also a lot of money.
So the cancellation of the export tax rebate policy for photovoltaics and more industries is not bad news, but the only way for an industry to grow bigger and stronger.
In the short term, it will indeed cause a certain reshuffle of the industry, and low-end production capacity will be eliminated. However, in the medium and long term, it will force industrial upgrading, force many industries to say goodbye to vicious price wars, and engage in technology wars and brand wars. It will force many industrial exports to change from “made in China and sold globally” to “made in China and sold globally”, thus guiding the continuous optimization and upgrading of the industrial structure and moving towards the high end.
As long as our company can establish real technological advantages and brand advantages, without tax rebates, the global market will still pay for exported products, and even without the involution-style fighting, they can be sold more expensively and at a more reasonable price.
In this way, on the one hand, the benefits originally transferred to foreign consumers can be recovered, and the money can be used to increase the welfare of domestic people. On the other hand, it can also help repair our relationship with our trading partners and create a healthier international trade environment.
Friends, if you have any other opinions or suggestions, you are welcome to put them in the comment area.
