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Foreign companies ask for no cut in tax favours
By Su Bei (China Daily)
Updated: 2005-01-14 00:00

The government's plan to end tax favours and bring all companies, domestic and foreign, under one tax regime has attracted the attention of foreign-funded companies.

Fifty four firms including ABB, BP, Siemens, Microsoft, Ericsson, Sony and Dell will submit a report to the State Council Legislative Affairs Office, asking for a grace period of five to 10 years to further enjoy tax favours under the existing tax policies, according to the China Business Times.

But a majority of the companies including Bayer, Sony, Siemens and BASF said they were unable to confirm the report.

A spokesperson from one of the 54 companies, who declined to be named, admitted that such a request was in the process of being made.

Ni Hongri, a senior researcher with the State Council Development Research Centre, said a unified income tax policy will have an impact on foreign companies' profits.

The nominal income tax rate for domestic companies stands at 33 per cent, while that for foreign-funded companies is 15 per cent. Reports said new tax rates may be needed.

Domestic firms have had to bear too heavy a burden under the current regime, Ni said. "It means such firms are at a disadvantage when competing internationally," she said.

"The government should unify the policies as soon as possible," she said. It would be more in line with the World Trade Organization (WTO) spirit of equal footing of competitors.

Director Xie Xuren of the State Administration of Taxation said at a press conference this week that the government will conduct an in-depth study on the tax system, but declined to give a timetable for the unification.

Chinese economists and researchers have long called for the bringing together of the two policies, saying the current system is unfair to domestic companies.

However, insiders said different government departments such as the Ministry of Finance, the State Administration of Taxation and the Ministry of Commerce held differing views on the proposal.

They said the Ministry of Commerce is concerned the tax reform will hurt foreign investment and also the nation's exports.

During the first 11 months of last year, the government approved 39,291 foreign-funded companies, involving actual foreign investment of US$57.6 billion.

China has become one of the premier destinations worldwide for foreign investment.

Meanwhile, foreign-funded companies account for 55 per cent of the country's exports.

But the Ministry of Finance said the government should unify the policies, now the country is a member of the WTO.

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