China logistics costs soar due to high tolls, fees and taxes
(HK SHIPPING GAZETTE 7 Dec 2013)
CHINA's Ministry of Commerce is studying measures to offset tolls against a value-added tax to ease costs in the logistics sector, Xinhua reports.
High costs have been a big problem for logistics. In 2012, China's logistics costs stood at CNY9.4 trillion (US$1.54 trillion), taking up 18 per cent of GDP, much higher than the world's average of 6.8 per cent.
But China's tax reform scheme has made matters worse. It replaces a business tax with a value-added tax, which was expanded in August from a number of cities to the entire country.
A survey shows that the total tax the transport and logistics service providers pay after the tax reform is 120 per cent more than what they paid before, doing damage to company profits.
Commenting on this, Ministry of Commerce official Wang Xuanqing explained that the cause for increased taxes is that some expenses are not included in the range of offsetable items against tax, such as tolls and labour cost.
Mr Wang said the ministry has been in talks with a number of government departments including the Ministry of Finance and the China State Administration of Taxation about the problem and tolls will be addressed.
There are various kinds of tolls in China, such as highway, bridge tolls, road maintenance and transport administration taxes. Mr Wang expects that there will be a substantial fall in taxes if tolls are included as an offsetable item.
Mr Wang pointed out that China's high logistics cost is partly because that the raw material origins in the north and west are far apart from the processing plants in the south and east. Long distance transportation of low value added freight has resulted in higher ratio of cost against profit.
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