multis win (apparently)

[Jonathan Lassen <jonathan.lassen@gmail.com>]

Unified taxation plan for businesses delayed
A common scale for domestic and foreign firms will not come in next year

SCMP Cary Huang
Jan 28 2004

Beijing's plan to unify corporate tax rates for domestic and foreign
companies looks set to be delayed, with a Ministry of Commerce report
revealing the proposal will not be put to the national legislature
this year.

The report, which contradicts remarks last week by senior Ministry of
Finance officials, highlights the rift between the two ministries.

The Ministry of Commerce is in charge of attracting foreign
investment, while the Ministry of Finance is responsible for tax
collection.

The nominal corporate income tax rate for domestic companies is 33 per
cent, but only 15 per cent for foreign-funded companies. Unifying the
rates would effectively put an end to the tax favours which have been
offered to foreign companies since China embarked on its open-door
policy.

Quoting a researcher at the Academy of Foreign Investment Research
under the Ministry of Commerce, the Beijing Times, an affiliate of the
People's Daily, said the unification of the tax regimes would be
postponed.

The proposed legislation would not be presented at this year's annual
session of the National People's Congress to be convened in March, it
said.

"The tax-unification proposal for domestic and foreign-invested firms
will not be debated at this year's NPC session," the researcher was
quoted as saying. "Thus it is also impossible for the law to be
enacted next year."

Neither the Ministry of Commerce nor the academy would confirm or deny
the report yesterday.

"We only confirm announcements made by the ministry. And as far as we
know, the ministry has not made such an announcement," a ministry
spokeswoman said.

The debate between the two ministries became public recently, with
officials openly providing different views on the issue. Finance
Minister Jin Renqing and his deputy, Lou Jiwei, have spoken of the
urgent need to unify the tax rates, saying this year would be the
right time. State Administration of Taxation director Xie Xuren has
also made similar comments.

Academics said vested interests were responsible for the difference of
view over the issue.

"The Ministry of Finance and the taxation administration are focused
on the reform of China's taxation system, while the Ministry of
Commerce is responsible for absorbing foreign investment," said Zuo
Liancun , of the School of International Trade and Economics at the
Guangdong University of Foreign Studies.

Professor Zuo said the mainland should merge the rates sooner rather
than later to meet requirements of the World Trade Organisation.

Last month, the Beijing-based China Business Times reported that 54
foreign -funded companies planned to ask the State Council for a grace
period of five to 10 years before the implementation of tax
unification.