The principle behind the VAT tax is that the tax is imposed on the buyer all the way up the supply chain of a product from the initial purchase of raw materials through to the retail consumer of the product. This when compared with a sales tax brings advantages and disadvantages, but that is an issue about which this is not the appropriate forum to talk about.
The reason why VAT tax is applied to the imports is because the Chinese producers of identical products do have to collect VAT tax from the buyers of their products. Otherwise they would be at an disadvantage vis-a-vis foreign exporters unless their products were subjected to import tariffs with at least an identical tax burden as the VAT tax.
"VAT permits are not issued to production for export creating a two tier pricing structure, lower value "legal" domestic vs 17% impost ROW. Lynas takes full advantage of this premium with direct sales into Japan magnet materials & others."
That seems to me not to be quite true and the reason is simple: miners as everybody else for that matter do have to pay VAT tax on their inputs. In other words when miner A receives an invoice for services or goods from firm B, then firm B has to collect the VAT tax from it. So, what happens is that an exporter does have the right to a tax refund for that part of the VAT tax paid in relation to the inputs that were incorporate into the exports.
I can understand the fact that for a Chinese buyer to buy Dy at the international price from Australia rather from China it will have in the very least to ask for a discount capable of covering its costs with transportation and insurance. What I have difficulty in understanding is the bizarre situation where Lynas can pocket 17% more by selling to clients in Japan rather than in China. Aren't the Japanese aware of, what it seems to be the case, the international price even when quoted in dollars, is the Chinese domestic price loaded with VAT?
As I said I find it a bit bizarre to have the Chinese domestic price loaded with VAT being used internationally as a reference price for transactions between their parties.
Do you guys have a link to where that is shown to be the case?
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