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China Adjusts Tax System for WTO Entry
The Chinese government is accelerating the process of amending and perfecting its taxation system for its pending accession to the World Trade Organization (WTO).
According to Xiang Huaicheng, Minister of Finance, the on-going national meeting of fiscal affairs in Beijing, China will equalize tax treatment for both Chinese and overseas companies. The country will adopt uniform rates of corporate income tax, tax on using cultivated land and tax on transport vehicles so as to give national treatment to foreign investors.
The Ministry of Finance is increasing its efforts to streamline tax incentives for foreign companies that are due to expire this year. The ministry is working on developing a management system that will assess the efficiency and control the size of tax incentives.
The ministry said that China will levy consumption tax on a wider variety of consumer goods, especially luxury goods and goods that harm the environment. China will also readjust the rates of consumption taxes so as to form a "reasonable" average level of tax rates, according to the ministry. For example, the country will change the method of calculating taxable prices of tobacco and alcohol products so as to plug in loopholes in tax collection.
According to the Ministry of Finance, China is accelerating the development of a nation-wide information network that will trace the personal incomes and large-sum payments made by individual residents.
It will also adopt a new set of staggered rates for income tax, raising the tax rate for high-income earners. At the same time, the country will put in place scientific methods of tax collection in order to prevent tax evasion.
In order to facilitate the re-organization of State-owned enterprises (SOEs), the Chinese government will formulate a set of rational fiscal and tax policies to encourage the SOEs to shed old burdens and adapt themselves to international competition.
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