Today the Semiconductor Industry Association (SIA) announced its strong support for the action of U.S. Trade Representative Robert Zoellick requesting formal consultations with China under the World Trade Organization's (WTO) Dispute Settlement procedures on that country's discriminatory Value Added Tax (VAT) on semiconductors.
China imposes a VAT of 17% on sales of all imported and domestically-produced semiconductors and integrated circuits. However, current Chinese government policy provides for a rebate of the VAT burden in excess of 3% for certain integrated circuits manufactured in China. GATT Article III (on "National Treatment") states that a WTO member cannot impose taxes on imported products that are greater than those imposed on domestic products. This discrimination against imported semiconductors through the VAT rebate is a clear violation of China's WTO obligations. SIA advocates either eliminating completely or reducing the VAT to 3% for all semiconductors.
