China Woos Foreign Investors by Slashing Taxes
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In a bid to stimulate its slowing economy, China has announced that it will cut taxes on the profits of foreign companies by up to 50 percent.
A commentary that appeared in the China Daily today has said that China’s tax revenue is “too high”.
In a bid to stimulate its slowing economy, China has announced that it will cut taxes on the profits of foreign companies by up to 50 percent.
A commentary that appeared in the China Daily today has said that China’s tax revenue is “too high”.
The Daily, seen as an official mouthpiece for the government, said that while the country’s GDP growth rate dipped to 7.6 percent in the second quarter – one of the slowest rates in recent years – China’s first half fiscal revenues grew 12.2 percent, with a bulk of it coming from taxation.
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In particular, corporate taxes grew 21.1 percent in June, much higher than its overall tax revenue growth in the same month.
The Daily added:
[quote] Even in 2009, when it had to mete out massive spending to combat the fallout from the 2008 global financial crisis, the country achieved a tax surplus of more than 200 billion yuan ($31.27 billion). [/quote]
Highlighting the need for a “stable and predictable taxation system”, the Daily said tax revenues were a quick source of income but also acknowledged the financial difficulties of enterprises during economic downturns.
According to the Financial Times, the tax reduction will also apply to dividends paid by Chinese listed companies to foreign shareholders through the Qualified Foreign Institutional Investor scheme.
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Experts at KPMG told the FT that the “changes could help companies save billions of dollars in tax payments, which might initially lead them to repatriate more profits, but ultimately should provide incentives for more investments.”
Khoon Ming Ho of KPMG China added:
[quote] The bigger picture is that because of the economic situation globally over the past couple of years, China sees the need to create a friendlier environment for foreign investors. This comes just as many companies are applying to make remittances of their half-year dividends. [/quote]
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