China to unify corporate income tax systems
(Xinhua)
Updated: 2006-01-18 09:07

China's taxation administration said Tuesday that the administration is still working on a proposal for a unified income tax system both for domestic and overseas-funded firms.

Wang Li, deputy director general of the State Administration of Taxation, said China will push forward the efforts to unify the corporate income taxes through normal legal procedures, but declined to give a timetable.

China introduced two different corporate income tax systems respectively for domestic and overseas firms since its 1994 tax reform with overseas firms enjoying lower tax burden.

Preferential tax offers given to overseas firms helped China attract overseas investment, technology and expertise, but it does not comply with international practices and have some negative effect on the development of market economy, said Wang.

The corporate tax systems need to be unified and regulated, he told a press conference held by the Information Office of the State Council, the Chinese cabinet.

The basic idea for the tax reform is to combine the two tax systems into a unified, transparent and fair one, which will serve the purpose of optimizing the use of overseas investment and the structure of national economy and technological upgrading of various sectors, he said.

The actual income tax rate has remained at 14 percent for overseas-funded businesses, much lower than the 24 percent rate for domestic firms, since China formulated the preferential policyfor overseas-funded enterprises in mid-1980s in a bid to lure foreign investment.

Experts and local companies have complained the policy does not comply with World Trade Organization principles and as a kind of discrimination against domestic firms, it also results in reduction of China's tax revenues.