Final Report - Asian Development Bank

TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project
Final Report Appendix 13
Table 2: Rates of Taxation to be Applied to the Difference Purchases of Project Financed
Enterprises during Construction and Operation
No. Item
Rate of
Taxation 5 (%)
1 Products the Project Will Buy During
Construction
1.1 Vehicles 14.07 6
1.2 Construction materials 5.48
1.3 Furniture 3.85
1.4 Electronic appliances/office equipment 2.92
1.5 Electric equipment 4.07
1.6 Seedling 3.85
1.7 Conventional machines 4.07
1.8 Agricultural chemicals 3.69
1.9 Electricity and water 5.45
2 The Products/Services the Project will
Buy and Sell During Operation
2.1 Admission ticket 5.5
2.2 Tourist reception (villa) 5.5
2.3 Framer’s Agricultural Products 0
2.4 Tourism handicrafts 3.85
2.5 Most other non-wage agricultural purchases 5.5
(Source: Provided to PPTA by accountants in Xi’an.)
Remarks
Based on sales income
13. As the market economy of China and Shaanxi becomes more integrated into the international
economy, conversion factors are used less often in PRC economic analysis. The Team used a
standard conversion factor (SCF) of 1.0 for most non-wage purchases. In recent ADB RRPs for
projects in China, there is varied practice with regard to the conversion of financial to economic prices.
The Hunan Flood Management Sector Project (June 2006) uses a SCF of 1.09 and a SWRF of 0.90;
the Heilongjiang Road Network Development Project (June2006) has a SERF of 1.01 (SCF = 0.99)
and a SWRF of 0.67; the Wuhan Wastewater and Stormwater Management Project (June 2006)
states that conversion factors have been used to estimate economic prices but does not state what
these factors are; the Guangxi Nanning Urban Environment Upgrading Project (June2006) used
implied conversion factors between 0.96 and 1.0; and the Shandong Hai River Basin Pollution Control
Project (May2006) uses a SERF of 1.013 (SCF = 0.987).
14. The one input adjusted was labor cost. A Standard Conversion Factor (SCF) of 1.0 was used
for skilled and semi-skilled labor, in light of the growing shortages of such labor in China especially in
major urban areas and their suburbs such as Xi’an. the Project Area A is within one hour’s drive from
Xi’an and therefore no adjustment for skilled and semi-skilled wages was made.
15. The shadow wage rate factor (SWRF) for unskilled labor is a more complex issue. SERF’s of
between 0.25 to 0.8 have been applied to unskilled labor to account of surplus labor especially in rural
areas. The Project Area, especially the ex-situ zone) is increasingly part of the Xi’an metro region,
and the Project will accelerate this integration. There is evidence that surplus unskilled labor is
declining with as a result both unskilled and casual labor wage rates increasing 7 . Shaanxi for example
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Includes the construction and education supplementary tax
6
Includes the purchasing supplementary tax
7
See for example a report published recently in the China Daily (May 12-13 on the front page) by the Chinese
Academy of Social Sciences on Labor Force Trends in the PRC, which stated that the supply of low-cost labor
that has been a major reason for China’s high economic growth since 1978 may start to disappear as early as
2010. One major reason for the potential shortage is that the rural labor force may not be as large as was
previously estimated. The report concludes that China is moving from an era of labor surplus to an era of labor
shortage. The result is rising labor costs not only in the Yangtze Delta and the Pearl River Delta (where wages
for unskilled labor have reportedly been increasing for a number of years) but as well in major western PRC cities
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