The Ministry of Commerce and the State Administration of Taxation issued a notice Thursday requiring local commerce and taxation departments to strengthen co-operation and speed up payments of tax rebates to ensure steady export growth.

"The governments at various levels should give first priority to paying tax rebates to key export companies,'' the notice said.

Tax rebates are a common practice adopted in international trade. The government usually refunds the value-added and consumption taxes to export companies that sell products abroad to increase the competitiveness of these ventures.

The State Administration of Taxation has issued four groups of tax rebate quotas, totaling 107.2 billion yuan (US$12.9 billion) for export companies since the beginning of this year.

By the end of May, tax departments had returned 57.9 billion yuan (US$7.0 billion) to export companies, an increase of 19.2 per cent compared to a year ago.

Earlier, the government said the country's tax rebate quota for this year was about 129 billion yuan (US$15.5 billion).

"This is about 100 billion yuan (US$12 billion) less than the real demand if the exports grew by only 10 per cent,'' said Niu Li, a senior economist with the State Information Center.

The government should try to increase the tax rebate quota first, Niu said.

A Ministry of Finance official said the ministry is working on a plan to increase the tax rebate quota for this year.

Ni Hongri, a senior researcher with the Development Research Center under the State Council, said the current fiscal situation allows the country to increase the rebate quota.

"The fiscal situation for the first four months was surprisingly good,'' she said.

By the end of April, the increased fiscal revenue had reached 167.5 billion yuan (US$20.2 billion), well above the 158.7 billion yuan (US$19.1 billion) increased revenue expected for 2003.

China is likely to increase the tax rebate quota by 20 billion yuan to 30 billion yuan (US$2.4 billion-US$3.6 billion) this year, Ni said.

Due to a limited tax rebate quota and the country's rapid export growth, the country owes a great deal of tax rebates to domestic export companies.

Reliable sources said by the end of last year, the delayed payments of tax rebates had reached 247 billion yuan (US$29.8 billion).

The tax refunds for 2002 and 2003 almost went unpaid to export companies in several major provinces and municipalities, Ni said.

(China Daily June 27, 2003)