A CHINESE tax official has assured foreign businessmen that their preferential tax treatment will not be cancelled under proposed reforms. Secretary-General of the China Taxation Society Wang Pingwu said yesterday China would take three years to reform its tax system, including the unification of tax rates for foreign and domestic companies. But Mr Wang said the Government still believed preferential tax treatment was necessary to attract foreign investment and technology. A former director of the State Administration of Taxation, Mr Wang said that policy would be retained. Total tax revenues from foreign firms and individuals amounted to more than 10 billion yuan (about HK$13.5 billion at the official rate) last year, about one per cent of overall tax revenue. At a seminar organised by the Hong Kong Taxation Institute, Mr Wang said the Government had to safeguard its own interest when giving tax preference to foreign businesses. It was therefore unlikely to completely waive tax on foreign businesses, he said. ''When devising our new taxation system, we will ensure consistency in our policy to avoid drastic increase in foreign enterprises' tax burden,'' said Mr Wang. He said local governments would be given a greater proportion of tax revenue as a way to prevent them from granting unauthorised tax breaks to foreign businesses. Currently, most of the tax revenue goes to the central Government, so local governments can give generous tax breaks without jeopardising their own interests. Under the proposed reform, a large part of tax revenue will be retained by local governments as a continuing source of revenue, rather than relying on Beijing for subsidies. Shen Shanqing, an official with the foreign tax department under the State Administration of Taxation, said the Government would take action against unauthorised tax breaks by local authorities. ''There is only one voice from the central government on the matter regarding tax preference for foreigners. Local authorities have no right to waive nationwide tax,'' he said. Mr Shen said many local governments resorted to extra tax preferences in order to compete with other regions for investment. Meanwhile, taxation officials from Guangdong said many mainland-owned processing and assembly factories were presenting themselves as foreign or joint ventures. Wang Gang, an official from the Shenzhen Taxation Bureau, said that among the 9,000 processing and assembly plants in the special economic zone, more than 90 per cent were exploiting the practice. They regarded the machinery brought into China by the foreign firms as investment, so the plant would be classified as a joint venture. This status would entitle the processing and assembly plants to enjoy the three years of corporate tax exemption only available to foreign or joint ventures. Officials said Beijing would soon issue an order to crackdown on the practice.