State banks urged to reform with gov't input
Finance Minister Jin Renqing yesterday urged China's State banks to launch realistic and effective reforms to ensure the government's huge input is worthwhile.
Speaking during a press conference hosted by the NPC, Jin said his ministry would foot the reform bill.
"But we hope we can buy a new mechanism with the money," he added.
The ministry issued 270 billion yuan (US$32.5 billion) in special bonds in 1998 to replenish the four banks.
In 1999, the banks were allowed to transfer 1.4 trillion yuan (US$168 billion) in dud loans to asset management companies, which specialize in handling bad debts.
"I guess the losses will be eventually covered by the Ministry of Finance," Jin said.
The ministry allows banks to use part of their interests to write off the bad loans, Jin said.
The ministry also offers preferen-tial tax policies on the banks' non-performing loans. "The choice in supporting the banks' reforms will depend on our fiscal conditions in the future," he said.
He stressed the country's economic power is strong enough to back the banks' reforms.
Meanwhile, the country's taxation chief gave his forecast for the much-anticipated revision on Personal Income Tax Law and unification of income tax for domestic and foreign-funded firms.
Xie Xuren, director of the State Administration of Taxation (SAT), said the Ministry of Finance and SAT have already worked out an initial plan to revise relevant chapters in the Personal Income Tax Law.
"The next step is to submit the plan to the State Council and then to the National People's Congress for approval," he said.
He was speaking amid mounting calls to raise the 800 yuan (US$96) threshold for personal income tax payments, and wide-spread expectation on substantial steps this year.
On the unification of enterprise income tax, Xie said "research will be proceeded further this year."
Foreign-funded enterprises now pay 15 per cent income tax while companies funded by domestic investors are charged a 33 per cent income tax rate.
However, a legislator at the NPC Financial and Economic Committee revealed China might levy unified income tax for domestic and overseas-funded firms in 2008.
"This was in my most optimistic forecast," Cheng Faguang, former deputy director of the SAT, was quoted by Xinhua as saying.
Jin said the government needs to introduce the long-anticipated but contentious fuel tax at the right time.
The tax was originally planned to be introduced in 1999 but postponed time and again due to conflicting opinions from different departments.
Difficulties include re-employment of the toll fee collectors that would be laid off because of the transition from fee to tax, and the extra burden the tax could impose on cabs and buses.
"We need to find more co-ordination to solve such problems," said Jin, adding the current soaring oil price is also a problem.
"We worry that if we begin to have the levy now, it will create an extra burden for enterprises," Jin said.
"We are firm on introducing the fuel tax. But we need to have good timing."