Chinese Official Pledges Tax Reform Push

by Mary Swire, for LawAndTax-News.com, Hong Kong

22 March 2005

Speaking at the weekend, China's Vice-Minister of Finance, Xiao Jie underlined the government's commitment to implementing tax reforms over the next five years.

In addition to improving the tax-sharing system between the central and local authorities in order to narrow the income gap between urban and rural areas, Mr Xiao pledged to optimize the current tax system, including regularizing the tax treatment of foreign and domestic companies.

Earlier this month, after a long-running battle between different factions in the Chinese government, and strenuous lobbying by Western companies, it was announced that the unification of corporate taxes would be delayed for further study.

In January, 54 major international companies joined forces to lobby the Chinese government, accepting the need for unification, but asking for a transition period of five to ten years, a request which has now effectively been granted.

The Finance Vice-Minister sought to reassure overseas enterprises, however, that following the unification of the tax rates a transition period would be put in place for foreign firms. He additionally revealed that tax breaks would continue to be offered to certain industry sectors, meaning that the move is unlikely to have a negative impact on foreign-funded companies.

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