CHINA is set to centralise its powers to exempt or reduce taxes to help halt abuses among regions which have led to unfair competition, according to official reports.
The move would ensure the success of a new revenue-sharing system that clearly defines the respective revenues going to the state funds or regional treasury, said a prominent economist in yesterday's People's Daily.
Professor Dai Yuanchen of the Economic Institute of the Chinese Academy of Social Sciences, said taxation was an important tool to ensure fair competition among different enterprises within a market economy.
However, some regions had arbitrarily exempted or reduced tax from enterprises, he said. Offering lower tax was the most common measure taken by localities to lure more foreign capital.
One result was that enterprises which manufactured the same product in different places paid different amounts of tax, said Professor Dai, adding this has had led to unfair competition, as well as market damage.
He said it was wrong that regions should have the power to exempt or reduce tax as they wished, and said he disagreed with the argument that what the regions were doing only affected their own revenue, and not that of central Government.
The malpractices had already led to adverse effects, he said. Backward enterprises, under protection from tax exemption, had become more profitable than some modern factories, which had led to a wastage of social resources and a decline in the efficiencyof some enterprises, he said.
