In contrast to the controversial property law, the corporate income tax law, which aims to unify income tax rates for domestic and foreign companies at 25 per cent, faced little obstacle in review.

It is the draft's first reading, but members considered it good enough to be submitted to the next NPC full session. Usually, a draft takes at least three reviews before being forwarded.

Legislators agreed that the tax rate is appropriate and the revision should not be delayed as favourable tax policies for overseas companies discriminate against local enterprises.

Companies in China currently pay income tax at a nominal rate of 33 per cent. But because of various tax waivers and incentives, foreign businesses actually pay about 15 per cent while domestic enterprises pay 24 per cent on average.

Shi Yaobin, director of the tax policy department of the Ministry of Finance, said the law would not result in a sharp decrease in foreign investment, as a stable society, vast market potential and low labour costs continue to be major attractions for investors.

In addition, the draft offers foreign businesses a grace period of five years, and says any favourable polices will apply to both local and overseas companies equally.

If passed, the law is expected to take effect on January 1, 2008.

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