Chinese legislators say unified tax rate will foster fair competition

Chinese legislators deliberated a draft bill on corporate income tax Monday, saying a unified tax rate of 25 percent for domestic and foreign companies will advance the cause of fair competition.

Members of the Standing Committee of the National People's Congress (NPC), or China's top legislature, discussed the bill Sunday.

Under China's dual income-tax structure, Chinese companies currently pay income tax at a nominal rate of 33 percent, while their foreign counterparts, who benefit from tax waivers and incentives to boost investment, pay an average of 15 percent.

These practices have helped China attract foreign investment but, with local businesses facing tougher competition since China's entry into the World Trade Organization (WTO) in 2001, pressure has mounted for a unified income-tax structure.

A total of 541 NPC deputies have put forward motions in support of a unified tax rate for domestic and foreign-invested enterprises (FIEs).

Legislators agreed that the 25 percent tax rate suggested in the draft law is an appropriate level to maintain a reasonable overall tax burden for businesses and transitional measures would help reduce the impact on FIEs.

Besides, China's fast growing economy ensures that the new rate will not starve state coffers.

They approved the clause providing for a 15-percent preferential rate for hi-tech businesses that boost innovation as well as tax incentives for infrastructure construction, environmental protection, water conservancy and production safety.

According to China's legislative process, three rounds of deliberation are carried out in the NPC Standing Committee once the draft bill is submitted.

Legislators suggested the bill be submitted to the NPC plenary session for enactment in March 2007. The new income tax rate is expected to take effect in 2008.

Source: Xinhua