Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: due date for vat payment :: cpt :: articles on VAT and GST in India :: VAT Audit :: ARTICLES ON INPUT TAX CREDIT IN VAT :: empanelment :: TDS :: list of goods taxed at 4% :: form 3cd :: TAX RATES - GOODS TAXABLE @ 4% :: Central Excise rule to resale the machines to a new company :: VAT RATES :: ACCOUNTING STANDARD :: ACCOUNTING STANDARDS
« News Headlines »
 8 benefits you must know about this tax-saving mutual fund
 10 most important income-tax changes which will apply from April 1
 Delhi: 54 CAs, company secretaries on radar in I-T crackdown against black money
 10 Income Tax Rules That Will Change From April. See Details Herea
 Looking for last-minute tax planning with Section 80C investments? Here's help
 Aadhaar mandatory for filing income tax return
 Will Aadhaar linkage solve India's income tax woes?
 GST roll out from July 1 will make goods cheaper: Jaitley
 Aadhaar To Be Mandatory For Filing Income Tax Return, PAN Application
 7 best tax-saving solutions which can help you save money
  No proposal to replace Income Tax with Banking Cash Transaction Tax

China goes fast-forward on uniform tax code
March, 31st 2007
India can take a leaf out of the Chinese statute book as bringing all enterprises within the scope of a single new law increases the transparency of the tax regime.

Nowadays it is pass to compare India and China in terms of development record in the post-reforms phase though the Middle Kingdom initiated economic change in the 1980s, a decade ahead of India.

Even as India is mulling over a new code for direct taxes to simplify the labyrinthine and litigation-generating procedures, China has surprised the world by passing two laws on March 16. These pieces of legislation are basically designed to improve the investment climate and unify taxes to make the process simple and transparent for assesses.

According to an analysis of the implications of the latest tax reforms in China by the Paris-based inter-governmental think-tank of 30 rich industrial countries, the Organisation for Economic Cooperation and Development (OECD), the new law is in consonance with the recommendations of its Investment Committee and Committee on Fiscal Affairs. OECD recalled its earlier view that China should attract FDI (foreign direct investments) by improving the regulatory framework rather than by offering fiscal and other preferential fillips to foreign investors.

End to uncertainty

The two changes effected by China's National People's Congress pertain to the Enterprise Income Tax Law and the Property Law, which lends equal protection in law to public and private property for the first time since the establishment of the People's Republic of China.

By setting a single 25 per cent tax rate for domestic and foreign invested enterprises, the Enterprise Income Tax Law ends the uncertainty over this policy since China's accession to the World Trade Organisation at the end of 2001.

Currently, foreign-invested enterprises (FIEs), or foreign companies, pay an average of 15 per cent of their income as Enterprise Income Tax, while domestic units pay 25 per cent.

The standard concessions for FIEs cover top income tax rates of 15 per cent and 24 per cent (depending on factors such as location) and come into effect in a company's sixth full year of profit-making after a two-year tax holiday and three years of half-rate tax.

Besides, concessions are available in certain sectors and locations.

Per contra, domestic companies are subject to a standard enterprise tax rate of 33 per cent, mitigated by sectoral and regional incentives, while domestic low-profit enterprises are taxed at 27 per cent and 18 per cent.

Standard Rate

OECD contends that the new law sets a standard rate of Enterprise Income Tax of 25 per cent, regardless of whether the enterprise is Chinese- or foreign-owned.

The rate has thus been slashed by eight percentage points for domestic enterprises and increased by an average ten percentage points for FIEs; a genuine bid to level the playing field.

As a corollary to this exercise, the Chinese authorities reckon that FIEs would pay 41 billion yuan more in Enterprise Income Tax in 2008, when the law comes into force, while domestic companies would pay 134 billion yuan less; the total revenue from Enterprise Income Tax is likely to be 93 billion yuan less than if the law had not been enacted.

It is interesting to note that by doing away with the incentives for foreign investors, the Chinese Government has now removed the motivation for round-tripping.

As a consequence, Chinese FDI statistics would get more accurate, as they will no longer include an unknown proportion of investment that is really domestic money coming back, disguised as foreign investment. Another salutary outcome is increased tax revenue flowing from the closing of this tax evasion avenue.

Some Sops Remain

However, the Chinese authorities have made it clear that the removal of fiscal sops for foreign investors would not mean end of spurs offered to those investing in the less-developed regions such as Western China or the Special Economic Zones (SEZs) and in sectors the government wants to promote such as environmental protection and renewable energy. A reason being that these incentives are non-discriminatory between foreign and domestic investors and they do not skew the playing field.

India, which is still grappling with a single direct tax code to subsume several amendments that were made to the Income-Tax Act, 1961, can take a leaf out of the Chinese book as its new law increases the transparency of the tax regime by bringing all enterprises within the scope of a single law.

Since this is construed as a step towards simplification of the plethora of tax legislation affecting FIEs in China, tax analysts say that the time has come for India too to rid its tax statutes of complexity, density and lack of clarity.

G. Srinivasan

Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Careers

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions