Source: CCTV.com

12-27-2006 18:20

Standing Committee Members of the National People's Congress have unanimously agreed on the need for a single law on corporate income tax. They say the tax uniformity will create an environment of fair competition for all enterprises. China adopted the current dual income-tax system in the 1980s to attract foreign investment. The recently discussed flat tax is aimed at placing businesses on an equal footing. It has taken several years to reach agreement on introducing this new draft law.

Generous tax incentives have fueled capital inflows, making China one of the world's top markets for foreign direct investment. By the end of August this year, nearly 600,000 foreign invested enterprises had been set up in China utilizing almost 600 billion US dollars as foreign capital.

Many people believe that it handicaps domestic players who have experienced tougher competition since China entered into the WTO in 2001. The Finance Ministry has been actively promoting the bill.

Officials stress the new tax rate compares favorably internationally. The bill also proposes a number of transitional measures to offset the impact on Foreign Invested Enterprises.

Analysts believe that China's market potential and operational cost advantages will continue to make it a favorable option for many foreign investors.

The new tax rate is expected to take effect in 2008 if the bill is adopted by the NPC plenary session in March 2007. According to official calculations, the state coffer will face a reduction of 93 billion yuan from the reduced rate.

 

Editor:Li Yang