Analysis Of Direct And Indirect Effects Of Reducing Value Added Tax On Foreign Cotton Imports

In March 5th, Premier Li Keqiang made clear in his government work report that the scale of tax reduction and reduction in 2019 will reach 2 trillion yuan.

One of the most interesting concerns is the deepening of VAT reform in structural tax cuts, which reduces the current 16% tax rate to 13% in manufacturing and other industries, and reduces the current 10% tax rate in pportation, construction and other industries to 9%.

This reduction of VAT can catch the "nose" of small and medium enterprises, which is another downward trend after the "camp changed to increase" and the benchmark tax rate decreased from 17% to 16% in May last year.

Judging from the feedback from enterprises such as cotton, cotton textile, clothing and foreign trade companies, such as full competition and low profit margins, a substantial reduction in the VAT rate will help lighten the burden, enhance product competitiveness and stimulate China's economic vitality. It will play a positive role in stabilizing the growth rate of textile industry in 2019, stabilizing the planting area of cotton flowers and enhancing the confidence of SMEs.

Industry analysis, regardless of the textile mill or the trading enterprise, the purchase of cotton will benefit greatly. The import value-added tax reduction, the pportation value-added tax reduction and other tax reduction dividends are not less than that of domestic cotton. The short term has a certain stimulation and boost effect on the import of Chinese buyers to the imported cotton, which will add fuel and firewood to the booming 2/3 month import business. However, the import and export benefits of the medium and long lines will gradually be diluted, and the import of cotton will return to calm or even dull.

First, the direct result of China's massive signing of imports of US cotton and the sharp reduction of the planting tax is to stimulate ICE and foreign cotton spot to rise sharply, and the price difference between inside and outside cotton is narrowed or even "upside down", and the competitiveness of outer cotton is declining.

From the information released by the representatives of China and the United States, cotton has been included in the list of agricultural products purchased in China, but it is not clear whether it is directly imported or stored or imported by society.

Second, the 4-6 month is the cotton planting period in the northern hemisphere. The tax reduction stimulates the continuous enlargement of China's cotton imports. In the United States, India, Central Asia, and other countries, the cotton planting area has been rebounded in 2019. If the cotton producing areas in China are in good wind and smooth weather, it will be a pattern of "more than 35 charges", and the phenomenon of "ICE suppressing internal market" is inevitable.

Thirdly, the pformation and upgrading of textile industry is facing a more severe test. How to achieve the upgrading of cotton gauze and clothing becomes the key.

With the sharp decline in value-added tax, small and micro enterprises as representatives of cotton textile, clothing and foreign trade companies, such as cotton textile, clothing and foreign trade companies and other competitive pressures, labor force full employment, but the vitality of thin profit enterprises is expected to continue to recover. We need to improve the quality of products and raise the level of profits to solve the problem. Otherwise, we will return to a large number of cotton (including medium and low quality cotton), a low price and low quality export textile, and only earn a processing fee and hardship. So India, Pakistan and other places of low spinnability low index cotton into the Chinese market is more and more difficult.