[Should have done it a long time ago!]--China corp tax reforms may come in second half of 2005, may be phased-in
Wednesday, March 23, 2005 3:13:17 AM
afxpress.com
SHANGHAI (AFX) - It is "highly likely" that China will begin to unify its corporate tax code for domestic and foreign-invested companies from the latter half of 2005, but the new tax regime may be phased in depending on financial conditions, a state planning official said. Jin Kang, chairman of the finance ministry's Institute of Fiscal Science, said the new rules may be implemented China-wide, but if the impact of the changes were deemed too much for the system, China would use a staged approach with the new rules being phased in for coastal areas last
China has been considering a unification of corporate income tax rates, partly as a result of its entry into the World Trade Organization
Foreign companies have long been taxed at lower rates than domestic companies, and local firms have argued forcefully for the same privileges
The majority of foreign-invested firms operate in coastal areas, so a phased introduction of the new rules would provide them with additional time to prepare for the new regime
Jin said the harmonized tax rate would be 24-25 pct, compared with the current 15 pct nominal corporate tax on foreign-invested companies
Jin also said that the new tax regime would not mean the end of preferential taxes for foreign invested companies, saying that policy support for enterprises in compliance with industrial policies "would continue and may even improve." He said support would be given to high-technology and environmentally friendly ventures. Foreign companies have generally opposed the tax harmonization plan, arguing they are subject to various types of other costs that do not apply to domestic companies while many government firms are entitled to subsidies and other favorable policies
Jin said that the tax changes would have a neutral impact on most companies when combined with other changes, including a new value-added tax (VAT) structure and other changes such as the removal of fees. Jin added that the government was also moving toward unifying property taxes for foreign invested and domestic companies, although no timetable was provided
He said the transition to the broader new tax regime may take three to five years, which would give foreign invested companies time to adjust and would encourage them to consider environmental and technological issues
Jin was speaking at the CEO Asia conference in Shanghai, where he was the keynote speaker
cm/dk chris.myrick@afxasia.com For more information and to contact AFX: www.afxnews.com and www.afxpress.com
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