National People's Congress

Turf wars delaying three key laws

PUBLISHED : Thursday, 02 March, 2006, 12:00am
UPDATED : Thursday, 02 March, 2006, 12:00am

Bills covering monopolies, property rights and business tax rates will not, after all, be tabled at NPC session

Disputes among government departments have forced the shelving of three important and long-awaited laws due for review at the upcoming annual National People's Congress session, sources say.

State media had earlier reported that drafts of the Anti-Monopoly Law and Property Law, and revisions to the Corporate Tax Law to unify rates for domestic and foreign-funded firms would be tabled at this year's session.

But at a meeting this week to set the agenda for the session, which convenes on Sunday, the NPC Standing Committee withdrew the drafts from consideration.

The congress is a largely ceremonial parliament, but is charged with examining and passing major laws.

The three laws have been a hot topic of academic debate.

The controversial anti-trust law, expected to challenge state-owned giants and multinationals' market power, has been in the works for more than a decade. Some investors see the measure as a potential ram for opening up parts of the economy still in state hands. China's main trade partners have pushed Beijing to speed up the legislation to help promote fairer competition.

The State Council had said it planned to complete drafting of the legislation last year. However, sources said the hopes for early legislation and enactment had been dashed by disagreement between departments over who should lead anti-trust actions. The powerful National Development and Reform Commission, the Ministry of Commerce and the State Administration of Industry and Commerce all play separate roles in regulatory action against monopolies.

Disagreement among government departments was also the reason behind the last-minute withdrawal of the draft law to unify income tax rates for domestic and overseas-funded companies, according to sources. The State Administration of Taxation submitted a draft of the law to the State Council early last year, but the State Council and the NPC Standing Committee agreed to shelve the debate because other ministries expressed differing views on the legislation.

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.

A senior legislative official said the new tax law would require the approval of the full NPC because its Standing Committee could only approve lesser legislation. 'The delay means the law cannot be passed this year as expected,' the official said.

Finance Minister Jin Renqing and the director-general of the State Administration of Taxation, Xie Xuren , have repeatedly spoken of the urgent need to unify the tax rates. But officials from the Ministry of Commerce and development and reform commission have said higher tax rates for foreign-funded companies would have a negative impact on direct foreign investment, which fell last year.

The leadership is keen to pass the property rights legislation because it is concerned about the increasing number of protests and riots over land disputes.

Last year, NPC chairman Wu Bangguo revealed that the Standing Committee had completed three rounds of deliberation on a draft. The top legislature released the full text of the draft law in July, prompting expectations it would be passed at this year's session.