Quote:
Originally Posted by CalGal2
Does anyone on the site know how to conduct an analysis showing how gross margin would change if production was moved from China to US factory due to VAT increase from 4% to 17%?
I am asked to do this analysis and am coming up stumped on this one. Thanks for any help on the subject.  |
VAT (Value Added Tax) : 1. Credit-invoice VAT 2. Subtraction-Method VAT.
Show the 1st scenario (China COGS at 4% VAT) -By using one of the methods above.
Show the 2nd scenario (China COGS increased to 17% VAT) -By using one of the methods above.
Show the 3rd scenario (US COGS, no VAT)
What's challenging is that US companies are actually moving business to China, because of the much lower wages. Also, you should review where are your customers and the cost of transportation. The increase in the VAT from 4% to 17% is huge, there are so many other things to factor in.
Hope this is helpful.
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