Cotton Textile Association: Tax Unreasonable To Curb Textile Industry Upgrading

In order to help the textile industry which is in a difficult position to get rid of the crisis, the state has introduced two preferential tax policies, including the temporary sliding rate of imported cotton from 5%-40% to 3%-40% and the export tax rebate rate of some textile and clothing from 11% to 13%.

Recently, however, Xu Wenying, chairman of the China Cotton Textile Industry Association, wrote the "2008 China cotton textile industry prosperity report" that the cotton import slip tax policy, the unreasonable policy of high and low yield of cotton purchasing and processing value-added tax and the "two machine" import levy 17% value added tax increased the cost of enterprises, and inhibited technological progress and industrial upgrading.

Although the state has lowered the provisional sliding rate of imported cotton, Xu Wenying believes that the implementation of the cotton sliding policy has made imported cotton prices more than 7% of domestic cotton, and the average import tax rate of imported cotton enterprises has been around 10% in 2006/07, which has greatly increased the burden on enterprises.

The state's policy of protecting farmers' income in the process of market economy has not reached the result of protecting farmers. Cotton producers and intermediate circulation sectors have not received enough profits. The cotton textile industry has assumed high taxes. Most of the enterprises have difficulties. The number of enterprises stopping production and half stop production has increased. The demand for cotton has reduced the sales of cotton in Xinjiang. However, China's cotton textile enterprises are at a disadvantage in international competition.

To abolish or reduce the sliding tax rate, the 1% import tariff is the voice of most cotton spinning enterprises.

At the same time, the advanced air-jet looms and automatic winder used by cotton textile enterprises (called "two machines") have abolished the import value-added tax reduction policy since the second half of 2007, which has increased the cost of technical pformation by 17%, and slowed down the pace of technological progress and industrial upgrading.

In the 1-5 month of this year, 1065 imported automatic winder machines dropped by 30.26%, and 5823 air-jet looms imported 5823.

In addition, the unreasonable and high yield policy of purchasing and processing value-added tax for cotton has increased the production cost of enterprises.

Cotton textile enterprise procurement implementation tax rate is 13%, product sales tax rate is 17%, and the current value-added tax can only be deducted by 13%, tax is higher than other industries 4 percentage points.

Compared with other industries, the cotton spinning industry is in an unfair competition environment, and its profit is very low. Most enterprises are already at the edge of losses.

The cotton textile industry has appealed for more than 10 years to get rid of the unfair policy of "high levy and low deduction".

As the largest net export industry in China, Xu Wenying believes that the appreciation of the renminbi has made the textile industry seriously difficult.

In 2007, the export of cotton and textile products accounted for 41% of the textile exports. The rapid appreciation of RMB made it impossible for the enterprises to take orders. In 2007, the appreciation of the RMB was over 6.19%, and the exchange loss of the textile enterprises was about 62 billion yuan, and the loss of the above scale enterprises accounted for about 5% of the value of the oral delivery.

The appreciation of RMB has exceeded 6.92% in 1-6 months in 2008. If RMB appreciation is 10%, the whole industry will lose 143 billion yuan.