lunes, 27 de marzo de 2006

Unified Corporate Income Tax in China

Forbes Magazine published an article entitled "China to Enact Unified Corporate Income Tax Law This Year." Once I read the entire article, I think the unification will take years to realize. For example, "Jiang Enzhu, spokesman for the National People's Congress, .... played down the impact of the planned new ruling."
"Jiang indicated that the new, standardized tax regime would not take effect immediately on enactment. We [China's Parliament] will also adopt some transitional steps and bear in mind the carrying capacity of the foreign-funded enterprises,' he said."

Furthermore, "within the government, opinion is divided on tax unification. While some government bodies call for a fair tax system, others fear this could deter future investment from overseas."

According to, "Forbes' assumption that a "fair" tax system equates to one with equal tax rates between foreign and domestic companies completely ignores the wealth of subsidies given to Chinese domestic companies and not given to foreign companies in China. I, and many others, view the lower foreign tax rate as fair because it helps equalize competition between foreign and domestic companies in China by counteracting the subsidies given to domestic companies.
Interestingly enough, there are murmurs that if and when China's corporate tax rate becomes unified, it will be at a rate between the present rates for foreign and domestic companies. I am hearing it will be at around 20 percent."

'With the further implementation of the policy of reform and opening up, the investment environment in China will be further improved. Therefore to make unified arrangements for corporate income tax for both domestic and foreign funded enterprises will not have a big impact on China's efforts to attract foreign investment.'