The government's plan to end tax benefits to foreign-invested
firms and bring all companies under a single tax regime has
attracted the attention of foreign-funded companies.
The China Business Times reported on Thursday that 54
firms, including ABB, BP, Siemens, Microsoft, Ericsson, Sony and
Dell, will submit a report to the State Council Legislative Affairs
Office, asking for a grace period of five to?10 years before
withdrawal of tax benefits.
Most of the companies, including Bayer, Sony, Siemens and BASF,
said they were unable to confirm the report. However, a
spokesperson from one of the 54, who declined to be named, admitted
that such a request was in the process of being made.
The nominal income tax rate for domestic companies is 33
percent, while that for foreign-funded companies is 15 percent.
Reports suggest that new tax rates may be set.
Domestic firms have had to bear too heavy a burden under the
current regime, according to Ni Hongri, a senior researcher with
the State Council Development Research Center.
"It means such firms are at a disadvantage when competing
internationally," she said. "The government should unify the
policies as soon as possible."
Director Xie Xuren of the State Administration of Taxation said
at a press conference this week that the government will conduct an
in-depth study on the tax system, but declined to give a timetable
for unification.
Chinese economists and researchers have long called for
integration of the two policies, saying the current system is
unfair to domestic companies.
However, the Ministry of Finance, the State Administration of
Taxation and the Ministry
of Commerce reportedly hold differing views on the
proposal.
Insiders say that the Ministry of Commerce is concerned that the
reform will damage foreign investment and also the nation's
exports.
During the first 11 months of last year, the government approved
39,291 foreign-funded companies, involving actual foreign
investment of US$57.6 billion and making the country one of the
premier destinations worldwide for foreign investment.
Meanwhile, foreign-funded companies account for 55 percent of
the country's exports.
However, the Ministry of Finance's stance is that in the spirit
of China's WTO membership, the policies should be unified.
(China Daily January 14, 2005)