The mainland is likely to receive a boost in tax income despite its pledge to lower import tariffs by about 23 per cent, according to tax experts. PricewaterhouseCoopers' tax services partner William Chan Chak-cheung yesterday said tax revenue could increase because trade volume would expand in the wake of the mainland's entry. The government coffers would also swell as more products entered the mainland through legal channels under continued anti-smuggling efforts and a lower tariff regime. Mr Chan cited official figures which showed tariff income doubled to 78.36 billion yuan (about HK$73.16 billion) in the first half due to a crackdown on smuggling. Under the deal struck between Beijing and Washington on Monday, the mainland will lower its average tariffs from 22.1 to 17 per cent. It will also cut tariffs on cars to 25 per cent by 2006 from the present 80-100 per cent. It will reduce tariffs on agricultural products to between 14.5 and 15 per cent. Mr Chan believed that, in general, tariffs ranging between 10 and 20 per cent would be acceptable. As Beijing continued to open its market, more foreign firms would invest in the mainland, which would attract more tax revenue for the government through enterprise income tax, value-added tax (VAT) and others, he said. He believed sufficient overall tax revenue might prompt the government to give a full VAT rebate. Similarly, tax services senior manager Raymond Wong Chi-hung expected full VAT rebates on export sales in one or two years. This had been partly made possible because the Beijing had adopted a more effective method of preventing companies faking receipts to collect tax rebates. 'The mainland will benefit if additional exports are encouraged in the absence of a VAT,' Mr Wong said. The VAT rebates are now set at 13, 15 and 17 per cent for different categories of export goods. China tax partner Marina Wong said the Sino-US agreement might help expedite Beijing's plan to unify various taxation systems for foreign invested companies and their domestic counterparts. Domestic and foreign companies are subject to different sets of tax rates and preferential tax policies according to their locations and the industry in which they operate. TAXATION
