China to Raise Tax Rates for Foreign Companies

BEIJING, PRC (June 7) - From 2003 China is to raise its tax rates for foreign companies. The business tax rates will reach the same level as for Chinese companies, China's Finance Minister Xiang recently announced. Today foreign companies benefit from a VIP treatment and pay a 15% business tax rate in five special economic zones, such as Shenzhen, Zhuai, Xiamen, Shantou and Hainan island and 49 development zones, following the ruling by former statesman Deng Xiao Ping in the eighties. This does not go for Chinese companies, whom have to pay 33% over their profits. The tax rate increase has become necessary for China to afford its social securities system. Those services relate to China's entrance to the WTO (World Trade Organization) towards the end of last year. Inefficient state companies face foreign competition after the opening of the Chinese market and only can survive through restructuring and redundancies. On top of this, the national state income falls back, due to lower import rates on foreign products, another consequence of its fresh WTO-membership. Minister Xiang said the government will act tougher against local authorities, whom offer tax benefits to foreign companies without permission. Higher Chinese tax rates also will have consequences for bicycle and bike parts manufacturers. Nearly all major international bicycle companies maintain operations in the People's Republic.(FN)