Fair taxes for foreign companies
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As of Dec 1, the Chinese government began to collect two taxes from overseas-funded companies and individuals with commercial interests in the country, namely the city maintenance and construction tax, and education-supporting tax. This marks the beginning of a standard tax treatment for both domestic and foreign companies.
For decades, China has reserved for overseas enterprises super-preferential tax policies. Early on in its reform and opening-up, China's domestic economic climate was more conducive to State-owned enterprises than to international enterprises. This was because the former could secure government support and thus had certain advantages in getting bank loans and financial subsidies. In a bid to attract foreign investment to help propel its economic growth, China introduced preferential tax policies for international companies.
The policies, in fact, are not conducive to promoting fair competition between domestic and foreign enterprises, and, to a certain extent, affect the development of domestic enterprises, private ones in particular.
So unifying the national tax treatment for domestic and foreign enterprises will create a fairer environment for competition between domestic and international companies.
China has already expedited the process of phasing out preferential policies for State-owned enterprises. These enterprises have no more advantage than their foreign counterparts when seeking bank loans. The identity of enterprises, domestic or foreign, State-owned or private, no longer serves as the chief concern of banks in granting loans. At the same time, the country's banking system is becoming increasingly mature with the introduction of foreign banks and the further development of shareholding commercial banks. State-owned commercial banks have gone through share-holding reforms.
State-owned enterprises can no longer secure subsidies from the government merely by means of their State-owned identity, and neither do they qualify for other policy incentives. So it would be unreasonable if preferential policies continue to serve the interests of foreign companies.
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