Logistics Industry: A Brief Comment on the Impact of Expansion of Value Added Tax Reform Pilot on Logistics

In terms of short-term profit impact, railway is positive, highway is negative, but there is a greater possibility of government subsidies, which has a slight negative impact on logistics. The 10 new provinces and municipalities involved in the listed companies covered by us are Ningbo-Shanghai Expressway, Zhejiang-Shanghai-Hangzhou-Yong Expressway (H), Anhui-Anhui-Anhui-Tongtong Expressway, Chutian Expressway, Jiande Stock, Guangzhou-Shenzhen Railway, Yuexiu Transportation (H) and Shenzhen Expressway. We expect that the negative impact on the annual profit of the highway industry will be about 1%-7%, mainly due to the tax rate increased from 3% to 6% value-added tax. Less deductible items in this book. Among them, Zhejiang Huhangyong has the least negative impact, about 1%; Chutian Expressway and Wantong Expressway have the greatest negative impact, 7.0% and 6.5% respectively; while for Guangzhou-Shenzhen Railway, we expect to have about 4% positive impact, mainly due to the large amount of deductible items in the railway industry. See Table 1 for details. However, referring to the situation of Shanghai Airport Group and Shanghai Airport, the government has a greater opportunity to subsidize the tax increase in the pilot process, so the actual impact will be less than our theoretical value. At the same time, we calculate the profit impact of the pilot project on the listed logistics companies. On average, there will be about 2% negative impact of small profits. See Table 2 in the body of our report.

In the medium term, it will reduce the cost of social logistics and improve the profitability of logistics industry, but referring to the situation in Shanghai, it will be a bitter and sweet process for logistics enterprises to make profits. Expanding the scope of the pilot project will increase the scope of deductible input tax, which will help reduce the burden of logistics enterprises and the overall logistics cost of society. However, in the current situation of weak economy, excess capacity, industry disorganization and irregular tax management, we believe that the profitability of logistics industry will have a bitter and sweet process.

The negative impact of initial profits makes it difficult to transfer tax effectively. If logistics is simply divided into three parts: warehousing, freight forwarding and transportation, the actual impact is not significant because the former two tax rates are only converted from 5% business tax to 6% value-added tax, while the transport industry from 3% business tax to 11% value-added tax is greatly affected. Taking standard container highway transportation as an example, the tariff is about 650 yuan/100 kilometers, and the tax of downstream customers is reduced by 26 yuan after tax reform, while the tax of transportation companies is increased by about 12 yuan due to insufficient deductible input tax, and the total tax on the chain is reduced by 14 yuan, so it is beneficial to the decrease of logistics cost (Table 4). However, because the transport industry is similar to a fully competitive market, in the current situation of insufficient demand, we believe that the cost of tax increases before the economic recovery is difficult to effectively pass on.

Medium-term positive effects began to emerge. Increased competitiveness led to increased market concentration. Increased deductibles led to lower tax costs and increased profitability.

For logistics enterprises, although the profitability of short-term enterprises may be negatively affected, the competitiveness of logistics services is enhanced by the issuance of VAT tickets; for downstream enterprises, due to the benefits of outsourcing, it is possible to further expand the scale of outsourcing and promote the expansion of market share of formal transport enterprises. At the same time, the expansion of the scope and region of tax pilot will increase the deductible input tax of logistics enterprises, thereby reducing the cost of tax and fee and improving the level of profit margin. Therefore, in the medium term, the profitability of formal logistics enterprises will have a bottoming up development process.

It is beneficial to optimize the industrial structure in the long run, but it will take a long time to complete from the current situation. For small and micro enterprises, the intention of changing the business tax from 5% to 3% value-added tax is very obvious. In the future, downstream customers will outsource their business to logistics or supply chain companies as a whole, and then to small and professional enterprises with advantages in the market segments, so as to improve the overall chain operation efficiency and reduce operating costs, the pattern is expected to emerge. However, considering that: 1) the government has the determination to reform the tax system, but the courage is slightly insufficient. For example, the tax rate is set on the basis that the total tax revenue does not show a significant decline, rather than how to encourage enterprises to operate more efficiently; 2) the current pattern of the logistics industry is still very scattered, and the tax management in the low-end market is not standardized and still dominated by vicious price competition. We believe that this gradual process. It still takes a long time to complete. If the tax rate can be reduced and unified, it will bring more than expected development opportunities for the industry.