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China Outlines 2006 Tax Reforms
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China plans to offer a series of tax incentives to facilitate its social and economic development this year.

Addressing a national tax conference in Beijing yesterday, Director of the State Administration of Taxation, Xie Xuren, said the government will announce a number of preferential tax policies to encourage employment and re-employment.

Such favorable policies will also be implemented in areas pertaining to agricultural and rural development, he said.

"We should carry out tax policies which aim to deal with the negative impact of bird flu in order to support the development of the country's poultry industry," Xie said.

He added that preferential tax policies that aim to renovate old industrial bases in the northeast and develop the country's western areas will also be continued this year.

The government is also looking into new tax measures that hope to increase corporate innovation and technical development, he said. "Tax policies can help in the development of a recycling-focused economy and the efficient use of resources."

The government will completely abolish agriculture tax and push forward further comprehensive reforms in rural areas.

Xie said the government will continue to carry out a trial reform on value-added tax in northeast China's Heilongjiang, Jilin and Liaoning provinces this year.

The trial reform, which started in July 2004, allows companies in eight major industries, including equipment and automobile manufacturing, to enjoy tax rebates for the purchase of new machinery equipment.

The government will also improve the corporate income tax policy, which is considered unfair for domestic companies.

Under the existing policy, the income tax rate for domestic companies is 33 percent, while foreign-funded firms only pay 17 percent.

Xie said the government will also look into the present consumption tax policy so that luxury items will be specifically included.

The current consumption tax only applies to 10 kinds of consumer goods including certain types of clothes and furniture.

China's tax revenue, exclusive of tariffs and agriculture tax, reached 3.09 trillion yuan (US$380.6 billion) last year, an increase of 20 percent from 2004.

(China Daily January 9, 2006)

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