(ChinaKnowledge, Sept 19, 2006) China¡¯s Ministry of Finance announced that value-added tax (VAT) rebate will be reduced as of Friday, according to the South China Morning Post Saturday.

However, the impact of the VAT rebate would be felt only next year as the Ministry of Finance said that export contracts signed yesterday are still entitled to the rebates, provided customs clearance applications are filed by Dec. 14.

The move aims to readjust the export mix, thus easing mounting trade surplus. Companies dealing in coal, steel, and textiles will be hit the hardest as tax on the exports of their goods is increased. Coal enjoyed an 8% VAT rebate, while the VAT rebate for steel, textiles, furniture, and non-ferrous metal products was between 2% and 6%.

Coal exporters are expected to be the most affected as VAT rebates for coal exports will be totally eliminated, analysts told the South China Morning Post. Profit forecasts for the next two years of coal producer China Shenhua Energy Co. Ltd. will be reduced by 2% and that of Yanzhou Coal Mining Co. Ltd. by 6%.

Yanzhou¡¯s profit forecast was lower than that of Shenhua¡¯s because the removal of the VAT rebate will have a greater impact for Yanzhou, whose exports constituted 22.3% of sales last year. Shenhua¡¯s exports made up 16.13% of its sales.

Judging from this year¡¯s export price of US$52 per ton and VAT rebate of RMB 33 per ton, Shenhua would have to pay RMB 500 million and Yanzhou Coal RMB 200 million next year when the new policy is fully implemented.

Shares of Shenhua Energy and Yanzhou Coal did not react well when the removal of VAT rebate news was announced on Friday, closing down 3.37% to HK$5.16 and 1.83% to HK$12.84 respectively before the Hong Kong Stock Exchange closed for the weekend.
source:ChinaKnowledge
tag:coal