Value Added Tax Reduced By 3%: Leading Fiber Enterprises Benefit Most And Textile Performance Elasticity Reaches 20%. Will Stimulate The Downstream Textile Enterprises To Buy Large Quantities?

The value added tax that has been passed for more than a year has finally been confirmed.

Recently, the government work report issued: confirm the massive tax reduction and deepen the value-added tax reform.

This year, the current 16% tax rate in manufacturing and other industries will be reduced to 13%, and the current 10% tax rate in pportation, construction and other industries will be reduced to 9%, and the rate of 6% tier one will remain unchanged.

As soon as the news comes out, this will definitely bring far-reaching influence to the future textile and chemical fiber market.

Value added tax has become the largest tax category in China, and the effect of tax reduction has achieved initial success.

The taxation of overseas developed economies is mainly direct tax, and the tax structure which is mainly indirect tax in China needs to be changed.

We divide fiscal revenue into direct tax (income tax, property tax and urban construction tax) and indirect taxes (value added tax, business tax, consumption tax and customs duties, resource tax and stamp duty).

It is observed that the total direct tax rate including the social insurance tax in the US tax structure is more than 90%, even though the proportion of neighboring direct taxes in Korea is more than 50%, while the direct tax rate in China is less than 40%.

Indirect tax accounts for a large proportion of the tax structure in China, because indirect tax is a tax to be passed through the price channel. This also causes our tax revenue to have a major impact on the price formation mechanism. The future indirect tax structure should be changed.

The value-added tax in indirect taxes has become the largest tax category in China.

VAT was first introduced in France in 1954. In 90s, many developing countries, including ASEAN countries, began to imitate the VAT system of developed countries on a large scale.

In terms of the scope of value-added tax collection, countries generally limit themselves to the manufacturing industry that is easy to calculate and levy, and then extend it to other industries. In terms of the types of value-added tax, the production value-added tax that is easy to statistics is generally chosen to be further improved to be a consumption value-added tax that encourages fixed asset investment.

As of 2017, the total value added tax of indirect taxes in China was more than 5 trillion and 600 billion, accounting for 39% of all tax revenues (even though the value added tax was considered to be more than 1/4).

In order to lighten the burden of enterprises, the State Council in 2017 reduced the VAT from the previous four to three. At the same time, from May 1, 2018, the tax rate of the industries that originally applied to 17% value-added tax rates and the 11% tariff rates of pportation, construction and basic telecommunications services were reduced by 1 percentage points respectively, and the third rate of value-added tax is 6%, 10% and 16% respectively.

Since June, the effect of value-added tax reduction has begun to be reflected. In the first 5 months of this year, the tax revenue of domestic value-added tax slowed to double-digit growth in the first 6-8 months of this year to the 6-8 digit growth rate. In August, the domestic value-added tax increased by only 2% over the same period last month, a record low in the past 1 years.

What is the impact of the 3% value-added tax rate on the operation of the textile and chemical fiber industry?

According to the calculation of Tianfeng securities, in 2019, the value-added tax rate was reduced by 1%, the 16% file would be reduced by 223 billion, the 10% duty will be reduced by 178 billion, and the 6% duty will be reduced by 209 billion.

If the 16% tax bracket is reduced by 3%, the theoretical deduction can be reduced to 668 billion 400 million yuan at most.

How much impact will it have on the textile industry chain?

From the point of view of the policy of reducing the value added tax rate, for the latter commodity prices, the absolute price and cost will be reduced, and the factory price of industrial products will be reduced, the cost of customs payment after import declaration will be reduced, and the cost of receiving goods from downstream enterprises will be reduced.

First of all, for textile production enterprises, if the value added tax rate is reduced from 16% to 13% when the cost is constant, reducing the tax burden of production enterprises can lighten the burden.

For textile enterprises, because the price of domestic fabric trade is generally included in the tax price, whether the price is down depends on the specific market supply and demand.

For textile enterprises as a buyer, the tax rate reduces the ability of bargaining space with weaving enterprises, thereby reducing the purchasing cost of enterprises. According to the current raw material prices, the cost of saving about 300 yuan per ton can be saved for enterprises.

The calculation of raw materials purchased by polyester enterprises can also save about 200 yuan per ton for enterprises.

Secondly, products with a large proportion of imported resources such as aromatics and polyester will also be affected by the decrease in value added tax.

From the import of pure benzene in recent years, we can see that despite high domestic inventories and more new capacity, the high import volume in 2017 continued to reach 330 thousand tons in 2018, of which the value added tax was reduced from 17% to 16%.

The two sessions decided to continue to reduce to 13%. According to the average import price last year, it will produce a decrease of 200 yuan / ton, which will ensure better production profits for downstream enterprises.

On the other hand, the competition between domestic and imported resources will become more intense along with the large-scale integration of domestic refinery and petrochemical facilities. Domestic manufacturers must adjust their thinking to improve product quality and service quality instead of taking market share by relying on low-end price competition.

Then the tax reform news release can stimulate the downstream textile enterprises to actively purchase?

According to the previous tax reform situation, the price decline did not stimulate enterprises to actively purchase.

A textile enterprise procurement director said that this tax reform has little impact on textile enterprises. Now the accounting method of textile enterprises has been modified. Because the market has experienced the risk of early rising and falling, most of the textile enterprises should still execute the method of buying and selling along with them.

However, there are also textile enterprises that reduce the value added tax, which is expected to reduce production costs and further enhance the competitiveness of textiles.

At present, the order situation is gradually opening up in March, and the spinning enterprises maintain a good state of low raw material inventory and high order.

Coupled with the positive and negative factors such as Sino US trade and enterprise reduction policy, the enthusiasm of short term downstream textile enterprises is expected to increase.

Which textile and chemical fiber enterprises will benefit most after the value-added tax rate has been lowered?

Of course, what is most concerned about is what textile enterprises are most benefited after the value-added tax rate is lowered.

First of all, look at the corresponding tax rates in various industries:

Then it is clear that lower value-added tax rates will benefit 16% and 10% industries.

Generally speaking, the higher the industry concentration is, the higher the monopoly degree of the industry is, the stronger the bargaining power of the head enterprises in the industry to the upstream and downstream industries.

On the whole, the industries benefiting from VAT and tax reduction are mainly: mechanical equipment (pportation equipment, metal products), chemical (petrochemical, chemical raw materials, plastic, rubber), automobile (automobile service, vehicle, other delivery equipment), non-ferrous metals (rare metals, industrial metals, gold), household appliances (white household appliances, audio-visual equipment), building materials (glass manufacturing, cement manufacturing), computer equipment, coal mining.

Some users think: no matter which industry, the first problem we consider is who will benefit most, not who will pay the most tax, but who will save the tax on the biggest elasticity of performance, that is, the reduction of output tax and the lower net interest rate.

The second problem is that the value-added tax is a non price tax. There is a problem of being pferred and undertaken. Therefore, products or services that are directly oriented to consumers can no doubt reduce prices, that is, the VAT can be turned into profits.

The third problem is the question of input tax. Some industries that choose tax deduction or exemption or industries with high gross margins are the only ones that can save the highest value-added tax.

In his view, the best choice is undoubtedly wholesale and retail trade, textile industry, food and beverage. According to the calculation of some brokerages, when the value added tax is reduced by 2%, the growth of wholesale and retail sales has reached 100%, which is the most flexible industry, and the elasticity of textiles has reached 20%.

The following are the major textile and clothing companies. The main choice is also high income, poor performance and the higher the gross profit margin.

On the whole, 3% of the tax rate, the overall cost decline, which is undoubtedly a great benefit to the current high cost textile industry.

Although the cost is down, the final product should be lowered correspondingly, but for the whole industry, the running cost has dropped a lot, which is the greatest benefit to boost the competitiveness of the product market.