The Times of India TUESDAY, JUNE 04, 2002
Foreign firms to pay more tax: China AFP BEIJING: China will significantly raise taxes levied on foreign companies from next year, state media reported on Tuesday, for the first time providing a timetable for a long-expected policy change. The steeper tax bill will come about as China eliminates most of the preferential tax rates currently offered to foreign firms, the Beijing Times said. "Foreign companies' income tax and local companies' income tax will be unified at some time next year," Finance Minister Xiang Huaicheng said according to the paper. The paper gave no further details about how the plans will be implemented, or whether the change will be gradual. Xiang's comment was consistent with rumors that Chinese officials are working on amendments to the enterprise income tax law, hoping to have the new rules ready by late this year or early next year. Local officials have long been arguing that a unified tax rate will eventually be necessary because of China's entry into the World Trade Organization (WTO) on December 11 last year. The overall corporate tax rate in China is 33 percent, but foreigners now pay as little as 15 percent as a result of incentive packages offered by various localities and industries. Officials preparing the tax law amendments favor a unified rate of 25 percent, according to people familiar with the draft. Although on paper foreign companies appear to be immensely privileged compared with their Chinese counterparts, the reality is more complicated than that, observers said. Many Chinese companies also pay preferential rates, according to obscure exceptions that the non-transparent tax regime allows. This may be why foreigners contribute a growing share of tax revenues in China. Last year, they paid 51.1 billion yuan (6.2 billion dollars) in enterprise income tax, up 57 percent from the year before. Chinese tax officials have previously suggested some tax incentives will be allowed to remain for foreign companies already operating in China, arguing this is permitted under WTO rules. Copyright © 2002 Times Internet Limited. All rights reserved.
