China's WTO Updates
Tax Law to Create Level Playing Field

China is drafting a new law on corporate income tax to help unify tax rates for foreign and domestic firms, a senior government economist said yesterday.

The draft, expected to be debated by lawmakers this year, will help level the playing field for foreign and domestic firms after China joins the WTO, said Sun Gang at the Institute of Fiscal Science under the Ministry of Finance.

"The current fragmented policies are unlikely to continue after China joins the World Trade Organization," he said.

Many foreign-funded firms enjoy preferential income tax rates as low as 15 percent as local authorities bid to woo foreign investors, while most domestic companies are taxed at 33 percent.

Government officials have pledged to reform the tax regime to give foreign firms the same treatment as domestic firms to adapt to the rules of the WTO, of which China could become a member later this year or early next year.

The new law, being drafted by the State Administration of Taxation, could be approved by the National People's Congress, or parliament, this year, Sun said.

Officials of the administration declined to comment.

"People generally believe the possibility of adopting a rate between 25 and 30 percent is big," Sun said. "But the exact rate can only be determined by the National People's Congress."

Analysts say the tax reform could take years to complete as it could face some opposition from local officials.

Sun said he expected the unification to take one to two years.

(Xinhua News Agency May 31, 2001)

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