China for tax parity for multinationals, domestic outfits:
[World News]: Beijing, Jan 20 : China is seeking to unify corporate income tax for domestic and foreign-funded enterprises, reports Xinhua.
Vice Minister for Finance Lou Jiwei said the process will be complete in one or two years but there may be a transitional period lasting 10 years.
He said the next step would be to remove or simplify various corporate income tax incentives, which would also help expand the tax bases. Then corporate income tax incentives would be granted on the basis of industrial sector and geological location.
"A 15 percent rate will be applied in China's western regions irrespective of whether the business is a domestic company or a foreign-funded company," said Lou.
He said the existing tax rates would be simplified and a moderate or slightly lower tax level would be put in place.
Wages, advertising expenditure and donations amounting to less than 10 percent of the payable corporate income tax would be treated as cost.
The average tax burden of foreign-funded enterprises is 11 percent at present, but 22 percent for domestic enterprises. It is 30 percent for China's large and medium-size state-owned enterprises.
In addition, foreign-funded enterprises are allowed to list all wages as cost, while domestic companies are not.
"Unifying the corporate income tax is an inevitable matter. The existing system has caused grave inequality between foreign-funded and Chinese companies. That's against the principle of fair competition," said Lou.
He said China "possessed the ripe conditions to push forward the unification", for it is obligated to grant equal treatment to both domestic and foreign companies after it joined the WTO.
Lou said the ministry firmly opposed the view that China's corporate income tax rates should not change.
"This viewpoint is wrong. A sovereign country is entitled to change its taxation system through legal procedure," he said.
Moreover, no country is obligated to guarantee foreign investors to keep a 15 percent or higher return on investment. It's natural for investors to face risks."
According to Lou, the return on investment of multinational companies is only 10 percent.
"What foreign investors truly value in China is the market and low cost, rather then tax incentives," said Lou.
Indo-Asian News Service
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