Adjustments to Export Tax Rebate Policies for Industries such as Photovoltaics: Underlying Significance and Industry Impact

Recently, the Ministry of Finance and the State Taxation Administration made significant adjustments to the export tax rebate policy for photovoltaic and battery products, sparking heated discussions in the market. Experts pointed out that export tax rebates are not essentially export subsidies; their core purpose is to avoid double taxation of exported products, thereby promoting fair trade. They stated that the adjustments to my country’s export tax rebate policy for some industries in recent years reflect a response to changes in international market demand and domestic industrial transformation. In the long run, this will help alleviate international trade frictions, reduce the fiscal burden, promote a more rational allocation of fiscal resources, and drive the transformation and upgrading of related industries. On January 8, the Ministry of Finance and the State Taxation Administration jointly issued an announcement that, effective April 1, 2026, the export tax rebate for photovoltaic and other products will be cancelled. From April 1, 2026 to December 31, 2026, the VAT export tax rebate rate for battery products will be reduced from 9% to 6%; from January 1, 2027, the VAT export tax rebate for battery products will be cancelled. For products subject to consumption tax among the aforementioned products, the export consumption tax policy will remain unchanged, and the consumption tax refund (exemption) policy will continue to apply. Export tax refund (exemption) refers to a tax system in international trade whereby the tax authorities refund the VAT and consumption tax already paid by the goods in the domestic production and circulation stages before export to the exporting enterprise. Experts emphasize that the export tax refund (exemption) system is not essentially an export subsidy, but a tax refund mechanism. The export tax refund refunds the taxes actually paid by the enterprise in the production and circulation stages of the goods, not a government grant, which is fundamentally different from direct subsidies. The export tax refund system originates from the zero-tax policy in international trade, aiming to ensure that exported goods compete fairly in the international market at tax-free prices, conforming to international practice. Professor Cui Fan of the University of International Business and Economics stated that currently, with the exception of a few countries like the United States, most countries in the world have established value-added tax (VAT) or similar taxes. Even in the United States, which does not levy VAT, sales tax is collected at the point of sale in most states. According to the World Trade Organization’s Agreement on Subsidies and Countervailing Measures, export tax rebates for VAT or similar turnover taxes, as long as they do not exceed the amount accumulated in the previous period, do not constitute export subsidies. For a long time, it has been a common practice in many countries for exporters to implement tax rebates while importers levy VAT or other indirect taxes at the import stage. my country has implemented an export tax rebate policy since 1985. Article 10, Paragraph 4 of the Value-Added Tax Law, which will come into effect on January 1, 2026, stipulates that the tax rate for exported goods is zero; unless otherwise stipulated by the State Council. Bai Ming, a member of the Academic Degrees Committee of the Ministry of Commerce Research Institute, holds the same view. He points out that the core function of export tax rebates is to maintain fairness between enterprises and market groups. Without tax rebates, a value-added tax (VAT) has already been levied domestically, and then it would be levied again in other countries, amounting to double taxation. The policy aims to avoid this situation. Experts point out that the setting of export tax rebate rates is mainly based on national economic policies, industrial development orientation, and fiscal sustainability requirements. Generally, the setting of tax rebate rates follows the principle of “encouraging the export of high value-added products and restricting the export of resource-based products.” Higher tax rebate rates are maintained for high-tech products or electromechanical products, while tax rebates are reduced or eliminated for resource-intensive or polluting products to guide the optimization of the export structure. Furthermore, the tax rebate rate is not static but is adjusted periodically according to changes in the economic situation. The export tax rebate policy for the photovoltaic industry began in 2013. Initially, enterprises could enjoy a VAT rebate rate as high as 50%. As the industry developed and expanded, the tax rebate rate was gradually reduced. This January, it was adjusted again, marking the first time since my country’s photovoltaic industry was included in the export tax rebate policy system that VAT export tax rebates for related products have been completely eliminated. Over the past decade, my country’s photovoltaic (PV) industry has developed rapidly and has become highly competitive in the international market. However, some countries have frequently erected trade barriers against Chinese PV products. Meanwhile, domestically, this once-emerging industry is facing overcapacity and is increasingly embroiled in price wars. On January 8th, the China Photovoltaic Industry Association issued a statement saying that appropriately reducing or eliminating export tax rebates for PV products would help promote a rational return of prices in foreign markets, reduce the risks of trade friction faced by my country, and effectively alleviate the burden on national finances, promoting a more rational and efficient allocation of fiscal resources. The association pointed out that since 2024, Chinese PV products have faced increasingly fierce competition in overseas markets, with export prices continuing to decline, showing a trend of “increased volume but decreased price.” Some companies, in the export process, not only engage in low-price competition but also convert export tax rebates into bargaining power, resulting in fiscal funds originally intended to offset domestic value-added tax burdens being transferred to overseas buyers during the bargaining process. Bai Ming also stated that if export tax rebates are abused in the trade process, it will undermine fairness and disrupt the normal international trade order. He mentioned that some companies, lacking actual performance, obtain tax refunds by purchasing export orders from others—a practice known as “buying export orders.” Other poorly performing companies rely on tax refunds to cover losses or even achieve profits, severely distorting market order. In recent years, more and more companies, especially SMEs in related industries, have become increasingly dependent on export tax refund policies. Many companies rely on export tax refund subsidies to survive, but problems such as overcapacity and supply-demand imbalances within the industry have not fundamentally changed. Teng Tai, Dean of the Wanbo New Economy Research Institute, stated that gradually eliminating unreasonable and unnecessary export tax refunds is not only a necessary requirement for adapting to economic development under the new circumstances, but also increases fiscal revenue, optimizes resource allocation, and allows the fruits of development to benefit more people’s livelihoods. From the perspective of industry development, this adjustment can also accelerate the survival of the fittest in the photovoltaic industry from an “anti-involution” perspective. If the policy adjustment is appropriate, the saved fiscal funds can be further used to support consumption expansion. An executive from Trina Solar, one of China’s leading photovoltaic (PV) companies, stated that gradually phasing out export tax rebates will help shift the industry from low-price competition to high-quality competition, allowing leading companies to better leverage their technological leadership and further increasing industry concentration. PV industry insiders predict that with rising export costs and overseas module prices, brand and superior technology premiums will become key factors for future exports. Simultaneously, the elimination of outdated domestic production capacity is expected to accelerate, allowing leading and high-tech companies to further expand their market share based on their scale and technological advantages. Cui Fan, a foreign trade expert, stated that export tax rebates, as a neutral trade policy, should not be overly used for industrial restructuring, macroeconomic control, or trade friction responses. The fundamental solution lies in improving competition order and establishing sound market exit mechanisms. Bai Ming suggested improving market pricing and fair tax mechanisms to promote the reasonable distribution of tax rebate benefits within the industrial chain, while ensuring timely and full payment of rebates, creating a fair tax environment for both domestic and foreign-invested enterprises. Furthermore, the profit-sharing mechanism also needs further improvement. Bai Ming pointed out that value-added tax (VAT) runs through multiple links in the industrial chain, but export tax rebates operate on a “whoever exports benefits” model. If the industrial chain involves seven or eight links, only the end-user exporting companies can receive tax rebates, while upstream supporting companies struggle to share the benefits, which is detrimental to the coordinated development of the industrial chain.