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China to Scrap Special Tax for Foreign Companies - 2002-01-10

China says it will gradually get rid of preferential tax treatment for foreign companies. Foreign firms in China typically pay half as much in taxes as Chinese firms.

China's chief tax official, Jin Renqing, has said now that China is a member of the World Trade Organization, foreign and Chinese companies should receive the same tax treatment.

Mr. Jin told a news conference in Beijing Thursday that the government will gradually eliminate the favorable 15 percent tax rate that foreign companies in some special economic zones currently enjoy. He says the current corporate tax rate for foreign companies is unfair to Chinese firms.

Chinese companies typically pay more than 30 percent in corporate taxes.

Last year, foreign companies generated more than $6.2 billion in tax revenue for the Chinese government, an increase of 57 percent over the previous year. Chinese companies paid more than $25 billion in corporate taxes, up 47 percent from the previous year.

Mr. Jin says there is no timetable for the tax changes, and the government will study different reform options.

He says China's goal is to find the best way to stimulate foreign investment, while promoting the development of Chinese as well as foreign companies.

In the early 1980s, China set up special economic zones to attract foreign capital in some coastal cities such as Shenzhen - opposite Hong Kong and Xiamen, a port city in the southeast. But their economic reform policies rapidly spread to other parts of the country.