BEIJING - Leaders of China's legislature have finished revisions of a law to
end three decades of blanket tax breaks for foreign companies and are sending
the measure to lawmakers for a final vote, a state news agency reported.
The presidium of the National People's Congress issued the decision Monday
after expanding deductions for environmental conservation and charitable
donations in the proposed law, the Xinhua News Agency said.
The measure, which is expected to be passed this week, would unify tax rates
for foreign and Chinese companies, raising the tax burden for many foreign
Tax breaks have helped to attract nearly $700 billion in investment over the
last two decades that has fueled China's economic boom. But Chinese companies
complain they are at a disadvantage because foreign-financed competitors pay
The new measure would set tax rates for most companies at 25 percent, with
lower rates for high-technology development.
The plan would raise the total annual tax bill for foreign investors by about
43 billion yuan ($5.5 billion), Finance Minister Jin Renqing said last week. The
government also would lose about 100 billion yuan ($12.5 billion) due to lower
tax payments from Chinese companies, he said.
Under the current system, Chinese companies pay 33 percent of their profits
in taxes. Foreign companies are exempt from taxes for their first two years in
China, then get a 50 percent reduction for three years and later can get breaks
that keep their tax rates as low as 10 percent.
"If the draft is passed, we will finally be able to stand on a level playing
field with our foreign counterparts," said Chen Guofeng, an NPC deputy who is
chairman of a textile company, was quoted as saying.