[100711.EN.BIZ] China Government Helps Logistics Enterprises Enlarge Profit Margin

CHINA's State Council, or cabinet, has unveiled eight measures to bring more orderly development to national logistics sector involving cutting road tolls for truckers and harmonising various taxes afflicting the industry.

Because the logistics sector spans so many facets, rules governing its operation are divided up among numerous government departments, and the taxes they levy push up the costs of delivery and consumption.

The State Council, after a two-year study, has pledged to unify business tax rates on different steps of the supply chain. At present, for example, there is a three per cent tax on transport and a five per cent tax on warehousing and freight forwarding.

If the government were to unify those rates to just three per cent, warehousing companies could raise their operating profit margins two percentage points to 9.95 per cent and net profit margins by 1.5 percentage points, says a Haitong Securities Co statement.

The State Council also said it will expand a pilot program to exempt tax collection obligations. At present, different companies with varying functions in the process of shipping a load of goods, including transport, distribution and warehousing, are all taxed on the same delivery.

The National Development and Reform Commission (NDRC) and the State Administration of Taxation in 2005 began a pilot programme to end the multiple taxes on the supply chain, but at the time, only 593 companies were included. Today, there are more than 60,000 logistics firms operating in China.

Logistics is an important factor in the economy. Last year, the sector accounted for 18 per cent of China's gross domestic product, double that of developed countries, said He Liming, director of China Federation of Logistics and Purchasing.

Highway tolls, accounting for one-third of logistics costs, are expected to be reduced under the new proposal, and an electronic toll system will be extended to allow trucks to pass through toll areas without stopping.
The new stimulus plan also calls for improvements in land use policies to allow expansion of convenient warehouse siting.

"We are eager to win government support on land use in major coastal cities, especially in Beijing, Shanghai and Guangzhou, because limited land in those cities is a bottleneck for our expansion," said Zhang Pengfei, president of Shanghai Runbow Logistics and Technology Co.

Source : HKSG, 08.07.11.