The draft Corporate Income Tax Law is now under discussion at
the ongoing NPC session, and will be presented for voting on March
16, 2007. A provision of particular interest stipulates the
unification or standardization of the rate of taxation at 25
percent, applicable to both domestic and foreign companies. In our
special series on the Corporate Income Tax Law, we'll be
interviewing NPC deputies, entrepreneurs, industry leaders, and
scholars for their take on the proposed unified tax rate, its
significance, and potential impact on China's industry and economy.
The following is our fifth interview with a group of entrepreneurs
from Jiangsu Province. The sixth interview with Prof. Liu
Jianwen of Peking University Law School comes tomorrow.??
– Editor
Entrepreneurs attending the Fifth Session of the Tenth National People's
Congress (NPC)?in Beijing in their capacity as
deputies have welcomed changes proposed by the draft Corporate
Income Tax Law, but have also expressed the need for more detail in
content, particularly in provisions regarding incentives and equal
treatment for all companies, and implementation measures.
The draft was submitted for deliberation on Thursday, March 8.
Its main provisions include: a unified tax rate of 25 percent for
both domestic and foreign-funded enterprises; a 20 percent
preferential rate of taxation for certain small low-profit
enterprises and 15 percent for some hi-tech enterprises; a
five-year transitional period for several foreign-funded
enterprises; a standardized policy for actual expenditure
deductions.
"This legislation is necessary and timely," Fang Yixin, board
chairman of Tayoi Cosmetics Company, said during a panel discussion
of the Jiangsu Delegation on Friday, March 9.
With the world's largest foreign exchange reserves and growing
fiscal strength, China will be able to manage a substantial
reduction in tax revenues, which will happen if the law is passed.
Fang added that the country's improved investment environment and
huge market will continue to attract foreign investors in spite of
rising operation costs.
However, Fang suggested allowing some room for further tax cuts,
proposing a taxation rate of between 22 and 24 percent.
Ju Zangwang, vice general manager of Beijing Sanan Agricultural
Science and Technology Co. Ltd, spoke highly of tax preferences for
companies in less robust industries such
as agriculture, forestry, infrastructure construction and
environment protection. Ju's company, for one, will benefit from
the changes. He added that the proposed preferential policies will
reinforce their core strengths and boost investment
enthusiasm.
"The preferential tax policies for agricultural enterprises
accord with China's actual conditions and will help solve
long-standing problems in rural areas, while the support for small
and hi-tech companies will have a positive impact on start-ups and
employment."
Xu Changjiang, board chairman of Jiangsu-based Wenfeng Group,
has also been looking forward to the tax law for a long time.
Xu Changjiang?from
the Jiangsu Delegation to the Fifth Session of the Tenth
NPC
"The new law will help to ensure equal competition in the
market," Xu told china.org.cn in an interview.
Wenfeng Group is a Top 500 enterprise in China. However, the
heavy tax burdens have made it harder for the company to compete
with foreign enterprises, particularly in the retail sector.
"The lowering of corporate income tax from 33 percent to 25
percent means that domestic companies will record higher profits,"
he said.
By his calculations, if pretax profits are about 300 million
yuan (US$38.74 million), which was the case in 2006, reduced taxes
would translate about 20 million yuan (US$2.58 million) more in net
profits.
According to Minister of Finance Jin Renqing, if the new tax law is implemented
in 2008, domestic corporate income tax payments will drop by 134
billion yuan (US$17.3 billion).
Fiscal issues aside, entrepreneurs are also calling for clear
provisions on implementation. Article 59 of the draft law provides
that the State Council is responsible for setting out detailed
implementation measures.
Voting on the draft of Corporate Income Tax Law is scheduled for
March 16. If approved, it is expected to take effect on January 1,
2008.
Anxious entrepreneurs are exerting pressure now in the hope that
the law is implemented at a much earlier date.
Our previous interviews:
HK Deputy: Corporate Tax Increases Welcomed
Sichuan Deputy: Tax Cut Good News for Chinese
Companies
Standardized Corporate Tax Rates for Level Playing
Field
?
Disabled Deputy: Raise Tax Relief for
Donations
(China.org.cn by staff reprter Wang Ke, March 12, 2007)
