Heavy taxes hamper Chinese private business

Updated: 2007-12-18 16:10

BEIJING -- Heavy taxation has become a major factor that hampers private enterprises' expansion, according to a survey by the China National Democratic Construction Association (CNDCA).

A report based on the results of the survey was released at the ongoing CNDCA 9th national congress, which opened in Beijing on Sunday.

According to the survey, 12.5 percent of private enterprises in China found the tax burden "too heavy, almost unbearable", reported the Beijing News on Monday.

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One-fourth of the enterprises agreed that "the administrative and law enforcement departments relevant to the private sector" have no concept of providing good service to business -- and sometimes even use their power to take advantage of private enterprise, the newspaper said.

The survey found that value-added tax revenues came mainly from the manufacturing, wholesale and retail industries, while most sales tax was generated from the construction and real estate industries. There were almost no tax revenues from private-sector financial firms or other state-dominated industries, which shows that private enterprises could only develop in parts of the economy.

Although new laws that take effect on January 1 will eventually equalize the tax rates for foreign and domestic companies, foreign enterprises will enjoy some residual tax advantages as higher rates for them are phased in, according to the newspaper.

CNDCA suggested that new regulations to implement the enterprise tax law should define small private enterprises as those with annual profits of less than 50,000 yuan (US$6,700) and should also encourage small enterprises to expand.

It also suggested that private companies should be allowed to enter all sectors, including those that are open to foreign enterprises and some of those that are yet to open.

As of the end of 2006, there were 34 million private enterprises in China, which generated tax revenue of 350.5 billion yuan or 9.5 percent of total tax revenues. That was a rise of about 6 percentage points from the share of tax revenues in 2000, when private firms only generated 3.3 percent of the nation's tax revenues.

CNDCA, one of the country's eight non-communist parties, was founded by industrialists and intellectuals in Chongqing on December 16, 1945. The CNDCA has more than 108,000 members nationwide, mainly business people.

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