China has decided to scrap value-added tax exemption for home-made steel products used for exports as of July 1, 2005, the Ministry of Finance said Friday in Beijing.

According to a document issued by the ministry in cooperation with the State Administration of Taxation, China began to offer the tax exemption since 1998 when the prices of China-made steel products were higher than the world market prices, and downstream firms in China imported steel products from overseas in huge quantities, causing great difficulty for domestic steel producers.

That tax prvilege had been very helpful in supporting domestic steel firms in turning out steel products in short supply in the country and improving their industrial mix, according to the document.

But things have change in terms of steel trade situation at home and abroad as steel prices in China are lower than that of the world market, and steel production causes too much pollutants, consumes too much energy and other resources, the ministry said.

With permission from China's State Council, or the central government, the two government departments, therefore, decided to call off the tax privilege to ease the country's energy shortage and growing environmental pressure from industrial pollution, according to the document.

Source: Xinhua