With its impending entry into the World Trade Organization (WTO), China will readjust its taxation system in line with the requirements of the trade body, according to Chen Faguang deputy director of the State Taxation Administration.
The readjustment will be carried out in three aspects:
Before its accession to the WTO, the country will revise those taxes that run counter to the regulations of the WTO, and readjust those the Chinese government has promised the trade body that it will readjust. Taxation that goes against the WTO's remuneration principles will be readjusted, and those in violation of rules against anti-dumping duties and state subsidies will be removed.
After joining the WTO, China will adopt an interim tax policy in some fields before the WTO formulates regulations, and revise or remove taxes in light of the various requirements of the WTO member countries. China will change its present two-tiered tax system applied to domestic and foreign enterprises, respectively, into a united one.
To accelerate the readjustment of its economic and capital structures, and sharpen the competitive edges of state enterprises, China will set up a new taxation structure and readjust the old one on the basis of the WTO regulations. It will introduce a special tax policy to support fledgling industries, and stimulate the further development of strong state enterprises which have shown themselves capable of withstanding fierce global competition.
In addition, to cope with the impact of the unemployment and farmers' income reduction expected in the wake of China's WTO entry, the country will standardize the rural tax policy to minimize farmers' losses after the rural market opens to the outside world. Meanwhile, China will levy inheritance and social security taxes, to guarantee the minimum living expenses of unemployed and laid-off workers and maintain social stability.
To support the development of the central and western regions, China will adopt preferential taxation measures, Chen Faguang said. This step was pioneered in 1999, when a new tax policy was issued concerning foreign investment in the western regions.
Since January 1 this year, foreign enterprises in the fields of energy and communications infrastructure in western China have enjoyed the same tax reductions as those in the rest of China.
As for foreign enterprises engaging in projects specially encouraged by the Chinese government, a 15 percent tax rate is levied within the first three years of operation.
