BIGGER taxes next year for China's Northeast Electrical Transmission and Transformation Machinery Manufacturing (NEMM) will be met by profits generated from more lucrative businesses, the company says.
From next year, the H-share company will forfeit privileges enjoyed under a contractual tax arrangement. Under that agreement the company was allowed a rate lower than the statutory one.
Chairman Xiang Yongchun said the company would have to pay 15 per cent income tax and 17 per cent value-added tax (VAT) on sales from 1996, but the increase would not eat into its profits.
'Our forecast for 1996 earnings has taken the factor into account.
'The company's sales and profit will grow substantially next year because of the manufacturing of new products with higher profit margins such as high-voltage transformers and gas insulated switchgear.' No profit forecast has been provided for next year but the company projects its earnings to reach 162 million yuan (about HK$150.82 million) this year.
Mr Xiang said the figure included an estimated 38 million yuan in VAT refund from the government, the difference between the contracted tax amount and the amount paid with the statutory rate.
Last year, NEMM posted net profit of 102.95 million yuan, which was boosted by a VAT refund of 38.17 million yuan. The profit would have been lower if it had to pay the statutory income tax at 33 per cent amounting to 36.8 million yuan instead of the 8.7 million yuan paid.