China plans to unify its tax code as early as 2006, raising
rates for foreign investors and lowering them for domestic
companies as it seeks to meet pledges made on entry to the World
Trade Organization (WTO).
The government plans a unified tax rate of between 24 percent
and 28 percent, Liao Luming, director of the finance ministry's
general office, said in Beijing, confirming a report in the
Asian Wall Street Journal that cited Deputy Finance
Minister Lou Jiwei.
Overseas companies now pay about 20 percent, while the domestic
rate is 33 percent.
Tax breaks for foreign companies, particularly in special
economic zones, have helped make China one of the world's largest
recipients of overseas investment and fuelled the fastest growth
among major economies.
China's economy, the world's sixth-largest, grew 9.9 percent in
the fourth quarter from a year earlier.
Foreign direct investment in China was US$54 billion last year,
the Ministry of
Commerce said in January.
Total overseas investment in China had reached US$501 billion at
the end of 2003, while contracted foreign investment rose to US$943
billion, the ministry said.
Chinese companies have been pressing for the change, saying the
tax code gives overseas rivals a competitive edge.
The government promised to equalize tax treatment for overseas
and domestic companies when it joined the WTO in 2001. The changes
will take place in 2006 at the earliest following approval by
China's lawmakers, Mr Lou said.
China offers preferential tax rates for companies such as
Motorola Inc to attract expertise and technology that it believes
the country needs to compete with the world's biggest
economies.
(China Daily February 9, 2004)