BIZCHINA> Taxation
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BIZCHINA> Taxation
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New corporate tax offers level playing field
By Jiang Wei (China Daily)
Updated: 2007-03-09 09:24 Analysts say sectors such as food and beverages, iron and steel, coal, papermaking and non-ferrous metals, too, stand to gain from the tax cut. An automobile business analyst, who doesn't want to be named, says: "Commercial vehicle enterprises such as China National Heavy Duty Truck Group Corp and bus giant Yutong Group may benefit a lot (from a unified tax policy) because most of their funds come from domestic investors ." The move is expected to prompt some domestic manufacturers in some traditional industries to seek independent and national brands. Some firms now earn most of their profit from joint ventures, which enjoy the preferential tax rates, rather than from their wholly owned businesses. Apart from the direct tax cut, domestic investors are also expected to benefit from other measures in the proposed tax reform package. If the new law is passed, domestic companies, like their overseas counterparts, will be allowed to list all the wages they pay as costs, instead of pre-tax deductible items. Most Chinese companies get a wages deduction of only 1,600 yuan ($206.73) per employee per month, meaning any amount they pay above that is not exempt from corporate tax. "The pre-tax deduction of all paid wages is important for banks because they have a large number of employees and a big wages bill," says She of CITIC China Securities. Bank of Chinaand the ICBC have "already got the State Administration of Taxation's approval" to raise their wage-deduction threshold. The new tax system includes other measures that are expected to benefit domestic firms and overseas investors both. First, the new law will be based more on sectors than regions; preferential tax rates will be granted to firms in high-tech sectors, particularly to biotech and aerospace companies. Preferential rates will also be enjoyed by sectors such as shipbuilding, equipment and machinery, banks, insurance, logistics and the traditional labor-intensive service industry. (For more biz stories, please visit Industries)
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