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The most influential All-China Federation of Industry and Commerce (CFIC) mooted a proposal to the first session of the 10th National Committee of the Chinese People's Political Consultative Conference (CPPCC), calling for modifying the current tax policies that are unfavorable for competition on an equal footing, merge as soon as possible the two sets of business income tax system for Chinese and foreign capital enterprises and eliminate the differences between governmental and non-governmental enterprises with regard to tax concessions.
Proposal recommends the introduction of consolidated proportional tax system for domestic and foreign capital enterprises to lighten the burdens of Chinese capital enterprises, the rational standardization of pretax deductions, waive the tax-contained wage system, raise the depreciation rate and increase the expenses on R&D.
Tax preferences should reflect the industrial policies of the state, says the proposal. The regional policies for western China development and the short-term policy of encouraging laid-off workers from state-owned enterprises should not be divided according to types of ownership.
It is calculated that that real average tax burden of domestic enterprises is 22 percent, exactly twice as much as that of foreign capital enterprises. The Federation has proposed equalizing the tax burden on many occasions.
The proposal says that tax reduction has become a worldwide trend for the purpose of improving the competitive edge on the international market and coping with economic slow-down. Many countries, including Germany, France and the United States have all come out with tax reduction plans to lower tax burdens.
As a result of heavy tax burdens, Chinese enterprises lack the strength and motive power to expand investment and carry out technical transformation and lack the vitality and motivation to engage in innovation, thus making it unfavorable for participating in international competition.
(Xinhua News Agency March 7, 2003)
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