TAIPEI, Taiwan China's value-added tax on semiconductors is due to expire Friday, concluding a deal reached between the US and China last year to end what US officials believed was a discriminatory tax against foreign chipmakers.
No formal announcement has been made about what will replace the VAT scheme, which allowed for a partial rebate of the tax for companies that manufacture chips in China. The give-back amounted to as much as 14 percent of the original 17 percent levy, which in 2003 totaled roughly $138 million, according to market researcher iSuppli Corp.
A year ago, the Bush Administration filed a complaint with the World Trade Organization, saying the tax gave an unfair advantage to local chipmakers. The two sides resolved the issue in bilateral negotiations last summer. China's National Development and Reform Commission is reportedly working on a new WTO-compliant policy to help boost its semiconductor industry, especially the hundreds of small IC design houses popping up.
One of the main complaints of local industry was that the VAT rebate was onerous to qualify for, and tended to benefit large, capital intensive companies like Shanghai's Semiconductor Manufacturing International Co.
One option under consideration is allocating more money to small firms through an expanded technology fund, which will be doled out to cities and provinces by the Ministry of Science and Technology as well as the Ministry of Information Industry.