China will introduce transitional measures before taking legal steps to bring parity to income taxes for Chinese and foreign-funded companies, said a senior legislator on Saturday.

 

The policy change will not generate a major influence on foreign investment in China, according to Jiang Enzhu, spokesman for the fourth session of the 10th National People's Congress (NPC).

 

The NPC Standing Committee has listed the Corporate Income Tax Law in its legislation plan this year. It will iron out the differences of enterprise income taxes between Chinese and foreign companies.

 

Foreign companies now enjoy a preferential tax rate of 15 percent, compared to 33 percent for domestic firms.

 

When drafting the new law, the legislators will take into full consideration the practical situation of foreign-funded enterprises and take some transitional measures to mitigate any negative influence on them, said Jiang at a press conference on Saturday.

 

Chinese officials and economists have had a long debate on the policy change, with some people fearing the flow of overseas investment to China will be diminished.

 

"For foreign investors, they care more about China's political stability and huge market," said Jiang, noting that China will continue to expand the opening scope and improve its investment environment.

 

It is necessary to establish a "unified, fair and transparent" market to promote equal competition for enterprises, said Jiang.

 

Finance Minister Jin Renqing said early last year that the introduction of the policy to unify income taxes for Chinese and foreign companies was "imminent."

 

(China Daily March 6, 2006)