Source: Xinhuanet

03-09-2007 09:01

China's proposed unified company income tax for domestic and foreign-funded enterprises will have little effect on foreign investment, Bert Hofman, World Bank (WB) lead economist for China, said on Thursday.

The proposed unified tax rate was 25 percent, about the average rate of corporate income tax around the world, Hofman said.

Developed countries in the Organization for Economic Cooperation and Development (OECD) charged on average slightly more and developing countries, notably those with relatively recent tax laws, charged a bit less.

"China's rate seems quite competitive for attracting foreign and domestic investment," Hofman said.

"There is little reason to believe that the new law will have a major effect on foreign investment."

China's top legislature, the National People's Congress (NPC), on Thursday, started examining the draft law on enterprise income tax, which suggests a unified income tax rate for domestic and foreign-funded companies at 25 percent.

Delivering an explanation to the lawmakers, Finance Minister Jin Renqing said the law was drafted to "establish a scientific and standardized corporate income tax system uniformly applicable to various types of enterprises and to create an environment for fair competition".

The rate for Chinese companies is currently set at 33 percent, but tax waivers and incentives are granted to foreign-funded enterprises.

Official estimates show the average tax on foreign-funded enterprises is 15 percent while that on the domestic enterprises is 25 percent.