Law to unify tax rates pulled as ministries fail to reach agreement
Cary Huang in Beijing
Beijing has withdrawn a draft law to unify income tax rates for domestic and overseas-funded companies after different government departments disagreed over the legislation, a State Council official said yesterday.
Xu Yulin, a deputy director of the State Council's Legislative Affairs Office, denied the delay was due to opposition from overseas firms operating on the mainland, saying rather that it reflected improvements in the mainland's law-making process.
He said the State Administration of Taxation had put forward a draft of the law to the State Council, but it was withdrawn after other ministries expressed different views on the legislation.
'It is a good thing to have intense debate [among ministries] as it suggests that our legislative procedures are increasingly democratic and transparent,' Mr Xu said on the sidelines of the annual NPC conference.
'We have done a lot of work [in consultation]. But there were big differences in views, so we decided to withdraw the draft and spend more time on further consultation.'
Mr Xu, a CPPCC member, denied media reports that multinational firms such as Bayer and Sony had written to the State Council asking for a grace period of five to 10 years before the two tax rates were unified.
At present, the income tax rate for overseas-funded companies on the mainland is 14 per cent - much lower than the 24 per cent for domestic companies.
'As an official in charge of the matter, I can responsibly tell you that there is no such thing,' he said, adding that not many foreign-funded firms opposed the plan.
Mr Xu said a new tax law would require the approval of the full NPC because the NPC Standing Committee could only approve lesser legislation. He did not give a timetable but said the earliest a new draft could be submitted was next year.
However, Cheng Faguang, a member of the NPC Finance and Economic Committee, has said the earliest a new tax law could be passed would be 2008.
'This is my most optimistic prediction,' Mr Cheng said.
Finance Minister Jin Renqing, his deputy, Lou Jiwei, and the director-general of the State Administration of Taxation, Xie Xuren, have recently spoken of the urgent need to unify the tax rates and have suggested this year as the right time.
But at a news conference on Wednesday, both Mr Jin and Mr Xie would only say that the central government would continue to study the issue this year.
Mr Xu admitted that different views on the issue had caused the delay.