Unified 25% corporate tax proposed
By Zhu Zhe (China Daily)Updated: 2006-12-25 08:40
He said the proposed 25 per cent tax rate is low compared to most other countries. Studies show that the average corporate income tax rate in 159 countries and regions was 28.6 per cent last fiscal year, 39.3 per cent in the United States and 35 per cent in India.
Any favourable polices, the draft law says, will apply to both local and overseas companies.
Small businesses which now pay either 18 per cent or 27 per cent depending on their profit level or the region and industry they are in, will have to pay a unified 20 per cent.
In addition, high-tech companies will pay a lower tax rate of 15 per cent; and investment in agriculture, forestry, fishing, and infrastructure such as airports, railways and irrigation works shall enjoy favourable policies.
Figures from the Finance Ministry show that the corporate income tax collected reached 551 billion yuan (US$71 billion) last year, accounting for 17.85 per cent of the total tax revenue.
However, after the law's implementation, the State coffers will face an estimated reduction of 93 billion yuan (US$11.6 billion). Although tax collected from foreign companies will rise by 41 billion yuan (US$5.1 billion), collections from domestic business will shrink by 134 billion yuan (US$16.8 billion).
But the ministry believes that China's fast-growing economy and growth momentum of fiscal revenues can absorb the loss. It also believes that the tax rate change will not result in a sharp decrease in foreign investment, as a stable society, vast market potential and low labour costs are major attractions.
Legislators yesterday also started debating the landmark draft property law for a record seventh time.
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