Draft corporate tax law to be tabled soon
(Xinhua)
Updated: 2006-10-18 10:12
A draft Corporate Tax Law that will unify taxes for domestic and
foreign-invested enterprises will be tabled in China's legislature for first
reading this month, an insider told Xinhua on Tuesday.
"The major obstacles in the legislative process have been cleared, only a few
technical problems remain to be solved," he said.
The State Council, China's Cabinet, approved the draft law in principle at
the end of September after hearing the Ministries of Finance and Commerce
present their research on the viability of unified enterprise taxes.
"An agreement has been reached among local authorities and governmental
departments. The legislative process will not be reversed," the insider said,
adding that technical revision of the draft law was still possible.
Chinese authorities intended to submit the draft to the Standing Committee of
the National People's Congress for a first reading in August. However,
objections from foreign investors and concern about a dramatic decline in
foreign investment inflows led to a delay.
Sources close to the drafting said that unified tax rates will fall into a
24-27 percent range, which is lower than the maximum rate of 33 percent paid by
domestic firms and higher than the 15 percent paid by foreign-invested
companies.
Foreign-invested companies may enjoy a 3-5 year transition period. But
taxation privileges will no longer be used to attract foreign investment.
Instead, tax policy will be used to upgrade China's industry, and especially to
encourage the development of sectors such as high-tech, infrastructure
facilities and environmental protection.
When the new law is implemented, all enterprises, large or small, local or
foreign-invested, will receive the same fiscal treatment, according to Ministry
of Finance Tax Policy Department director Shi Yaobin.
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