Express firms see China Post tax taking 25-40pc of their profits
CHINA"s new "general postal service fund" tax on private express companies to subsidise state-run China Post and its express company has aroused opposition from the industry, which says the levy will cut 25 to 40 per cent of their profits, Xinhua reports.

If the government collects CNY360 million (US$58.4 million) a proposed it will take 1.3 per cent of express revenues, which means a profit loss of 25 to 40 per cent as earnings run typically run from three to five per cent of sales.

Express companies, already suffering from low profit, worry that if the plan comes into effect, they will be either forced to raise rates or suffer losses for not doing so.

Domestic and foreign companies have joined the stand against the new tax. Hu Rong, director from domestic express company ZJS called it "robbery".

The government argues that private express companies mainly serve major cities while China Post serves loss-making smaller more remote centres, and that the private sector should share this burden.

But China Express Consulting web"s Xu Yong said the government is not opening up the "general postal service" market to private companies. If the fund is to subsidise the loss China Post makes in remote regions, then the government should fully open up the market first, he said.

What"s more, the IPO registration statement of EMS, the express sector of China Post revealed that the state-run firm is not loss-making but posted a CNY20.94 billion net profit in 2011. It is expected to earn even more in 2012.

According to the regulation, the government will levy CNY0.1 per piece of parcel on same city delivery, CNY0.2 on different domestic city delivery, CNY1 on those to Hong Kong, Macau and Taiwan and CNY2 on those to foreign cities.

Statistics show China"s express companies handled 1.71 billion parcels in the first quarter of this year and earned CNY28.41 billion"s revenue. Different city delivery took up 71.4 per cent of the total, same city delivery 25.6 per cent, international and Hong Kong, Taiwan delivery three per cent.

Yao Xin, a manager from TNT said CNY2 per piece"s charge will put the company that is struggling in a depressed European economy into a life-and-death situation.

Mr Xu said though business volume of private domestic express companies has been climbing since 2005, their service rates are not rising along and have even dropped. Plus ever increasing cost of labour, fuel and rent, the profit rate of many of them has fallen below five per cent and is expected to fall lower in 2013. If their pressure is make heavier by the fund, they will have to transfer the cost to customers by raising rates.