• Mon
  • Jul 28, 2014
  • Updated: 4:31pm

Tax discounts in western regions to continue

PUBLISHED : Saturday, 06 August, 2011, 12:00am
UPDATED : Saturday, 06 August, 2011, 12:00am

The central government has decided to extend a policy that allows most enterprises in western regions to enjoy big corporate income tax discounts for another 10 years.

Experts said the decision was made with the aim of narrowing the regional income gap, stimulating industrial migration to less-developed regions and pacifying ethnic conflicts in regions such as Xinjiang and Tibet .

The Ministry of Finance, the General Administration of Customs and the State Administration of Taxation jointly issued a statement on July 27 saying they would keep the tax at 15 per cent for industries whose development they wanted to encourage in western regions. The tax is 25 per cent in generally more-developed regions, 66 per cent higher.

A dozen landlocked provinces and municipalities participate in the scheme, launched in 2000 by former chairman Jiang Zemin to help the area catch up with costal economies in the east. Almost half of the participants are autonomous regions - Xinjiang, Tibet, Inner Mongolia, Guangxi and Ningxia - where rich natural resources are in sharp contrast to low incomes and living standards.

Besides making direct investment in basic infrastructure, Beijing also launched a package of favorable economic policies in 2000 to encourage private and foreign investment. The lower corporate income tax has been the most attractive.

Other fiscal incentives have included tariff exemptions for imported machinery and as further tax cuts for enterprises in transport, power generation, water, postal and television broadcasting sectors. Those incentives will also continue.

Encouraged industries include sectors ranging from energy to natural resources to manufacturing. They include companies specialising in mining, steel production, chemistry, construction materials, heavy machinery, vehicles, textiles and pharmaceuticals.

Many of these industries consume large amounts of energy and pollute heavily, which has become less desirable in more developed regions such as Guangdong and Zhejiang .

Dr Su Ming, deputy director of the Research Institute for Fiscal Science under the Ministry of Finance, said extending the benefits was crucial to the government's national development strategy.

Su said the western-development campaign had failed in the last decade to reach its most important goal: closing the income gap between the east and west regions.

He also noted that sensitive regions, such as Xinjiang and Tibet, would benefit from the incentives in the form of improved social stability.

Lower taxes, investment and jobs would lead to higher living standards, he said, 'and a high living standard will make people less willing to fight'.

66%

The proportion of China's poor - those defined as surviving on less than US$1 a day - who live in the western regions

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