China outlines tax reforms in 2006

China plans to offer a series of tax incentives to facilitate its social and economic development this year.

Addressing a national tax conference in Beijing yesterday, Director of the State Administration of Taxation Xie Xuren said the government will annouce a number of preferential tax policies to encourage employment and reemployment.

Such favourable policies will also be implemented in areas pertaining to agricultural and rural development, he said.

"We had better carry out tax policies which aim to deal with the negative impact of bird flu in order to support the development of the country's poultry industry," Xie said.

He added that preferential tax policies that aim to renovate old industrial bases in the northeast and develop the country's western areas will be continuing this year.

The government is also looking into new tax measures that hope to increase corporate innovation and technical development, he said. "Tax policies will be favourable for the development of a recyclable economy and the efficient use of resources."

The government will completely abolish agriculture tax and push forward comprehensive reforms in rural areas.

Xie said the government will continue to carry out a trial reform on value-added tax in Northeast China's Heilongjiang, Jilin and Liaoning provinces this year.

The trial reform, which started in July 2004, allows companies in eight major industries, including equipment and automobile manufacture, to take tax rebates when buying new machinery equipment.

The government will also improve the corporate income tax policy, which is considered unfair for domestic companies.

Under the existing policy, the income tax rate for domestic companies is 33 per cent, while foreign-funded firms only pay 17 per cent.

Xie said the government will also look into the present consumption tax policy so that luxury spending will be specifically included.

Currently consumption tax only applies to 10 kinds of consumer goods such as clothes and furniture.

China's tax revenue, exclusive of tariffs and agriculture tax, reached 3.09 trillion yuan (US$380.6 billion) last year, an increase of 20 per cent from 2004.