BEIJING (AFX) - China plans to enact this year a corporate income tax law that eventually unifies tax rates for foreign and domestic firms, parliament's spokesman said.
Jiang Enzhu, spokesman for the National People's Congress, told reporters that a corporate income tax law that includes this provision is part of this year's legislative program.
'In order to make unified, transparent and fair market rules and encourage fair competition among various enterprises it is highly necessary for us to make the relevant laws and provisions concerning unified corporate income tax legislation,' he said.
Foreign companies have long been taxed at lower rates than their domestic counterparts. Local firms have argued forcefully for the same privileges though foreign companies maintain that local rivals are able to obtain preferential loans and other special treatment.
Chinese companies currently are supposed to pay income tax of 33 pct but many foreign investors have been given tax waivers or reduced tax rates as an incentive to invest in China.
The actual average income tax rate of domestic companies is 24 pct while the average for foreign companies is 14 pct, according to the official Xinhua news agency.
Jiang indicated that the new, standardized tax regime would not take effect immediately on enactment.
'We will also adopt some transitional steps and bear in mind the carrying capacity of the foreign-funded enterprises,' he said.
China has been near the top of the rankings as a destination for foreign direct investment since its accession to the World Trade Organization in 2001.
However, actual foreign direct investment declined last year for the first time since 1999, down 0.5 pct from the previous year.
Within the government, opinion is divided on tax unification. While some government bodies call for a fair tax system, others fear this could deter future investment from overseas.
Jiang played down the impact of the planned new ruling.
'With the further implementation of the policy of reform and opening up, the investment environment in China will be further improved. Therefore to make unified arrangements for corporate income tax for both domestic and foreign funded enterprises will not have a big impact on China's efforts to attract foreign investment.'
China's parliament starts its annual session tomorrow, with new laws and revisions of existing legislation a key part of the agenda.
sr/wk