As Thursday dawned, China's top legislature, the National
People's Congress (NPC), currently meeting in Beijing, began
examining two major draft laws. These would respectively grant
equal protection to both state and private property and create a
level income tax playing field for domestic and foreign-funded
enterprises.?
?
Both drafts were submitted for deliberation at the ongoing annual session of the Tenth NPC, as lawmakers
gathered for their second plenary meeting in the Great Hall of the
People in Beijing on Thursday morning.
Draft Property Law
Reading an explanation of the property law to assembled
deputies, Wang Zhaoguo, vice chairman of the NPC Standing
Committee, said that "enacting the property law is needed to uphold
the basic socialist economic system, to help regulate the socialist
market economy, and to safeguard the immediate interests of the
people."
Once enacted, the law will ensure equal protection is given "to
the property of the state, the collective and the individual as
stipulated in the Constitution," added Wang.
Wang said that following the rules of a socialist market
economy, all parties enjoy equal market status, benefit from the
same rights, and respect the same rules and responsibilities.
"If all areas of the market are not catered with equal
protection, or if varied methods are employed in settling disputes
or determining legal responsibility, it will not be possible to
develop the socialist market economy, nor is it possible to uphold
and improve the basic economic system of socialism," Wang said.
To prevent any loss of state property, the law will boost
protection of state-owned property in five important aspects,
namely strengthening prohibitive measures against illegal
possession, looting, illegal sharing, withholding or destruction of
state property.
Those found guilty of the above infractions against state
property will be prosecuted to the full extent of the law,
according to a full text of the draft distributed to the press at
the session.
Wang said the law also respected "the current basic policies of
the Party in rural areas" and kept in mind the most urgent problems
in coordinating national interests and promoting harmony.
In order to grant the farmers a long-term and guaranteed
land-use right, the draft property law stipulates that when
farmers' land contracts expire, the contractor can have the
contract renewed.
As part of the draft civil code, the property law first came
before the NPC Standing Committee back in 2002, after close to a
decade of preparation. In order to take public interest into
account from all sectors of society, the law was made public in
July 2005 with over 10,000 comments and suggestions being received
in consequence.
After an unprecedented seventh reading, the NPC Standing
Committee decided last December to finally put the law up for vote
at the Fifth Session of the Tenth NPC, calling the latest draft "a
mature crystallization of the wisdom of the collective".
Draft?Corporate Income Tax Law
For its part, the draft enterprise income tax law will propose a
new 25 percent unified income tax rate, concerning all companies,
both foreign and domestic.
Whilst explaining the law, Finance Minister Jin Renqing said it had been drafted to "create
a scientific and standardized income tax system applicable to all
enterprises and create a fair competitive environment."
As it stands, domestic and foreign-funded enterprises are taxed
at a flat 33 percent rate. However, in some special regions, some
foreign-funded enterprises benefit from a preferential rate of 24
or 15 percent, and domestic low-profit enterprises are levied at
two brackets of special rates of 27 percent and 18 percent
respectively.?
"Too many tax rate brackets allow for a large disparity between
nominal income tax rates and the tax burden reality for different
types of enterprises. To end this disparity, a unified income tax
rate becomes necessary," Jin said.
He revealed that the proposed 25 percent of tax rate would
likely ease the tax burden on most domestic enterprises while
keeping in check an eventual rise for foreign-funded
enterprises.
International statistics put the average enterprise income tax
rate across 159 countries and regions at 28.6 percent with the rate
in China's 18 neighboring countries and regions standing at 26.7
percent.
"The rate of 25 percent is comparatively low to the rest of the
world, thus allowing improvement in enterprises' competitiveness
and attracting more foreign investment," Jin told lawmakers.
Transitional preferential measures were given to allow the old
enterprises, which had an income tax rate of 15 percent or 24
percent under the current tax laws, to enjoy a gradually increasing
income tax rate within five years after the new tax law takes
effect, according to the draft law.
China adopted preferential tax policies during its opening-up
drive at the end of the 1970s to attract foreign investment and
diversify its economy.
By 2006, China had approved 594,000 foreign-funded enterprises,
with US$691.9 billion of foreign fund used. 21.12 percent of
China's total tax revenue for last year came from foreign-funded
enterprises, totaling US$795 billion.
Explanation on Draft Property
Law
Explanation on Draft Enterprise Income Tax
Law
(Xinhua News Agency March 8, 2007)
