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Outdated Preferential Tax Policies May be Abolished

A senior tax regulator said in Beijing on February 17 that China should cut some redundant preferential tax policies for foreign-funded enterprises and strengthen taxation management to accelerate taxation system reform and achieve sustainable tax increases.


Xu Shanda, deputy director of China's State Administration of Taxation (SAT), said at a financial forum in Beijing that some taxes for China's domestic enterprises are currently "higher" than those in other developed countries, and the relatively heavy tax burden will hamper enterprises' innovation ability as well as their competitive edge in the international market.


To resolve the problem and achieve a higher general tax income, China should cut taxes on domestic enterprises, and meanwhile abolish the outdated preferential tax policies for foreign investment, Xu said.


Furthermore, a better management of taxation would also contribute to an increase of national tax income, Xu added.


Xie Xuren, SAT's director, said in January that China would start a trial reform of its taxation system this year, kick off reform trials of the tax system of value added tax (VAT), corporate income tax and personal income tax in some Chinese regions, and launch a new fuel consumption tax.


According to the latest statistics, China's total volume of tax revenue exceeded two trillion yuan (US$250 billion), and the amount of increase exceeded 300 billion yuan in 2003.


Official statistics also showed that China's total tax revenue that went to the state coffers in 2003 reached 2046.1 billion yuan, excluding tariff revenue and agricultural tax revenue. This figure is up 20.3 percent, or 345.8 billion yuan, over the previous year.


(China Daily February 18, 2004)

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