How much impact will the government’s tax reduction have on the cotton textile industry

On March 5, the opening ceremony of the second session of the 13th National People’s Congress was held in the Great Hall of the people in Beijing. Premier Li Keqiang delivered a government work report and announced the implementation of a larger scale of tax reduction. Inclusive tax reduction and structural tax reduction should be carried out simultaneously, focusing on reducing the tax burden of the manufacturing industry and small and micro enterprises, deepening the reform of value-added tax, reducing the current tax rate of 16% to 13% in manufacturing and other industries, and reducing the current tax rate of 10% to 9% in transportation, construction and other industries, Ensure that the tax burden of major industries is significantly reduced.


It is reported that as the largest tax in China, the total domestic value-added tax reached 5.64 trillion yuan in 2017, accounting for 39.1% of the total tax revenue. This tax reduction is expected to further reduce the tax burden of enterprises and individuals in China, and is expected to give a positive impetus to expanding domestic demand and stimulating consumption.

The intensity of this tax reduction has been significantly increased. In May 2018, the government once lowered the value-added tax rate. At that time, the value-added tax rate was reduced from 17% to 16%, and the value-added tax rate of transportation, construction, basic communication services and other industries and agricultural products and other goods was reduced from 11% to 10%. Due to the small reduction, the market and enterprises responded very bland. However, this round of tax reduction will increase again, and its impact on the market will also increase.

Let’s take a textile enterprise as an example. Assuming that the sales price of one ton of cotton yarn is about 24000 yuan / ton, the tax free price of cotton yarn before the tax rate adjustment is 24000 / 1.16 = 20690 yuan / ton, and the value-added tax payable for sales is 20690 * 16% = 3310 yuan / ton. After the adjustment, assuming that the sales price of cotton yarn remains unchanged, the tax free price of cotton yarn after the tax rate adjustment is 24000 / 1.13 = 21239 yuan / ton, and the value-added tax payable for sales is 21239 * 13% = 2761 yuan / ton, with a difference of 549 yuan / ton. For enterprises, the burden reduction is not small. Of course, the above is only a rough calculation.

It can be seen that tax reduction and burden reduction have a certain positive impact on enterprise operation and profits, and may also play a certain role in the decline of cotton and cotton yarn prices in the future

Post time: Sep-07-2022