China to introduce level playing field
China is considering implementing a unified income tax policy to end tax favours that foreign-funded companies currently enjoy, an official with the ministry of finance said. The country currently practises a dual-track enterprise income tax policy for domestic and foreign-funded companies.
The income tax rate for domestic companies is 33%, while the figure stands at just 17% for foreign-funded companies. Tax incentives played an important role in attracting foreign investment before the Chinese market began to open up, the Ministry official said.
Figures from the Ministry of Foreign Trade and Economic Co-operation (MOFTEC) indicate that China approved 382,930 foreign-funded enterprises by the end of September involving $726 billion in contractual investment and $380.8 billion in actual investment. Last year, taxes paid by foreign companies rose 41% to $28 billion, accounting for 18.3% of China's total tax revenues.
WTO entry will also spur an improved market system, which includes a more complete and transparent legal system, more open markets and more efficient administrative practices. The more open market needs a fair tax environment for domestic and foreign-funded companies so that they can compete on an equal footing.
