(Yicai) June 11 -- Hainan’s tariff-free imports doubled in the four and a half months after the southern Chinese province launched island-wide special customs operations under its Free Trade Port regime last December.

Zero-tariff imports into Hainan surged to nearly CNY2.3 billion (USD333.6 billion) between Dec. 18 and April 30 from a year earlier, Liao Zengliang, deputy director of the working committee office of Hainan FTP, said at a press conference yesterday.

Zero tariffs are Hainan’s main preferential tax policy. Eligible provincial companies and public institutions can bring in items on the zero-tariff list without paying import duties, import value-added tax, or consumption tax.

Since the island-wide customs operation began on Dec. 18, the zero-tariff goods list has expanded to about 6,600 items from 1,900, raising the share of untaxed goods to 74 percent from 21 percent.

Goods imported to the Chinese mainland through Hainan are generally still subject to import duties, import VAT, and consumption tax. But for those industries being encouraged in Hainan, goods containing imported materials and components can still enter the mainland duty-free if their processing value added in Hainan reaches at least 30 percent.

Processing value-added duty exemption is one of thebHainan FTP’s most valuable key policies because it helps to push policy benefits deeper into the industrial chain, Zhang Yueqiang, deputy director of Hainan’s commerce department, said at the press briefing.

Thirty-four companies in Hainan used the policy to sell processed goods into the mainland in the first four and a half months of special customs operations, with a combined value of CNY510 million (USD75.3 million) and saving CNY29 million (USD4.3 million) in taxes, Zhang noted.

The policy’s cumulatively calculated bonded value-added model lets upstream firms process imported raw materials into intermediate products and supply them to downstream firms for further manufacturing, so that the policy benefits can be enjoyed across the supply chain, Zhang pointed out.

As an example, he said a Hainan refiner can import feedstock to make polyolefin resin, which can then be used by a local factory to produce industrial packaging ton bags. If the combined value added in Hainan exceeds 30 percent, the finished goods can enter the mainland without import duties, allowing the whole chain to benefit, Zhang said.

In addition to the value-added duty exemption, the zero-tariff policy also grants a 15 percent corporate income tax rate to encouraged enterprises, much lower than the statutory 25 percent for Chinese businesses, said Zhou Zheng, deputy director of Hainan’s finance department. And it exempts qualified high-caliber and urgently needed talent from paying the more than 15 percent personal income tax.

Hainan FTP’s tax regime has begun to show the systemic advantage of “1+1>2,” or one plus one is bigger than two. Hainan’s general public budget revenue rose 1.2 percent to CNY42.2 billion (USD6.2 billion) in the first five months of the year from a year ago, with tax revenue up 7 percent at CNY34. 8 billion, according to data from the provincial finance department.

Editors: Tang Shihua, Futura Costaglione