Chinese Premier Wen Jiabao said Monday that the timing and conditions are now
ripe for unifying the enterprise income tax rates for domestic and
overseas-funded enterprises to "level the playing field."
Wen made the remark while delivering a government work report to the
just-opened parliamentary annual session, which will deliberate the draft law on
equalizing corporate income tax for both domestic and foreign companies.
The unified income tax rate will help foster a fairer, more regulated and
transparent taxation system for all kinds of businesses, and help improve the
quality and standard of China's utilization of foreign investment, Jiang Enzhu,
spokesman for the annual session of National People's Congress (NPC), the
national parliament, said Sunday.
"The draft law will neither cause massive influence on foreign companies or
affect their enthusiasm of investing in China," Jiang said.
The draft suggests to unify the income tax rates for domestic and foreign
companies at 25 percent, according to earlier reports.
The lawmaking process, initiated last December, aims to ease years of
criticism that the original dual income-tax structure is unfair to domestic
enterprises.
The income tax rate for Chinese companies is currently set at 33 percent,
while their foreign counterparts, which benefit from tax waivers and incentives,
pay an average of 15 percent. Both of them actually pay less due to other
flexible preferential policies.
Many people believe that such a policy handicaps domestic businesses which
have to face tougher competition since China's accession to the World Trade
Organization (WTO) in 2001.
The reform on corporate income tax marks the maturity of China' s socialist
market economy, said Shi Yaobin, director of the taxation
policy department under the Ministry of Finance.
"It does not intend to put restrictions on foreign companies nor to
counteract their too small tax contributions before. The purpose is to create a
fair environment for competition," Shi said.
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