The draft Corporate Income Tax Law is now under discussion at the ongoing NPC session, and will be presented for voting on March 16, 2007. A provision of particular interest stipulates the unification or standardization of the rate of taxation at 25 percent, applicable to both domestic and foreign companies. In our special series on the Corporate Income Tax Law, we'll be interviewing NPC deputies, entrepreneurs, industry leaders, and scholars for their take on the proposed unified tax rate, its significance, and potential impact on China's industry and economy. The following is our fourth interview with a Jiangsu Province deputy Jiang Deming. The fifth interview with a group of entrepreneurs from Jiangsu Province comes tomorrow. -- Editor.
 
Encouraging public welfare donations is one way of adjusting income distribution and should therefore be bolstered by preferential tax policies, so says Jiang Deming, a deputy attending the Fifth Session of the Tenth National People's Congress in Beijing, and who proposes raising tax deductions for such donations, which the draft Corporate Income Tax Law provides is deductible only if they do not exceed 10 percent of annual profits.
 
Jiang, a deputy from Jiangsu Province, is disabled after amputation of one leg. But his disability has not prevented him from submitting nearly 200 proposals over the past 10 years.

Commenting on the draft Corporate Income Tax Law, Jiang said: "Reforming the current corporate income tax system is necessary for the country's market economy system and for the creation of fair market competition. There's a lot of support for it and I believe it will be approved."

The draft was submitted to the assembly for examination and approval on Thursday. Its main points include: a unified tax rate of 25 percent for both domestic and foreign-funded enterprises; a 20 percent preferential rate for eligible small low-profit enterprises and 15 percent for hi-tech enterprises; a five-year transitional period to adopt the new tax rates for certain foreign-funded enterprises; a standardized policy for actual expenditure deductions.
 
In 2004, Jiang, together with other NPC deputies, submitted a bill proposing that corporate tax for domestic and foreign-funded enterprises be unified. In the last four years, a total of 16 similar bills have been put forward. 
 
"Public welfare issues are closely connected with the redistribution of social wealth. Donations to this end could help plug the loopholes of current income distribution systems. This is why the government should give the matter its full support." 
 
The draft also stipulates that a company's public donation expenditures are deductible if they do not exceed 10 percent of its annual profits.
 
Jiang wants to see the limit raised. He would also like to see improvements to tax collection methods, which he believes are not adequately provided for in the draft. 
 
"China"s tax reform is based on the principles of simplifying tax regimes, broadening tax bases, lowering tax rates and strictly enforcing administration of tax collection. We've seen the first three points being taken care of, but not the last one.”
  
The draft law will be put to an open vote on March 16. If approved, it is expected to take effect on January 1, 2008.

Our previous three interviews:
HK Deputy: Corporate Tax Increases Welcomed
Sichuan Deputy: Tax Cut Good News for Chinese Companies
Standardized Corporate Tax Rates for Level Playing Field

(China.org.cn by staff reporter Tang Fuchun, March 11, 2007)