The Dutch Ministry of Economic Affairs on Friday welcomed China's new draft legislation unifying income tax rates for domestic and foreign-funded companies, saying it will "hopefully create more equal competition" in the country and make Chinese firms "more competitive abroad."

"The Dutch Ministry of Economic Affairs hopes that China's new draft law to close a tax gap between domestic and foreign companies will create a level playing field in China and help increase Chinese companies' competitiveness," the ministry told Xinhua in a written interview.

"The new scheme will hopefully create more equal competition and hopefully better quality products and prices for consumers," it said.

"It will also prepare Chinese companies to be more competitive abroad," it added.

The draft law, introduced on Thursday to China's legislature, the National People's Congress, unifies income tax rates for domestic and foreign firms at 25 percent, instead of the current 33 percent rate for Chinese firms and 15 percent for their foreign counterparts.

Chinese Finance Minister Jin Renqing said Friday that the government plans to put the new legislation into force from January 1 next year and it will be phased in over five years to cushion the blow.

The Dutch ministry said it hopes "there will be an orderly transition to the new tax scheme.

"Foreign companies should be informed well in advance and given enough time in order to prepare," it said.

Commenting on the property rights law, which was also under review by the Chinese legislature, the Dutch Ministry of Economic Affairs said it "appreciates the draft legislation to protect private property in China."

The new property bill grants equal protection to public and private properties. The Chinese government hopes, among other things, the law will help protect investments.

Trade between the Netherlands and China increased rapidly in the past decade. The Netherlands is China's second largest trade partner within the European Union and bilateral trade stood at 28.8 billion U.S. dollars in 2005.

Dutch investment in China is also growing fast over the past few years and it reached 330 million dollars in 2005.

Source: Xinhua