Xinhua - English

A press conference for the Third Session of the 10th National People's Congress (NPC) of China is held in Beijing, March 9, 2005. Jin Renqing, Chinese finance minister, and Xie Xuren, director general of the State Administration of Taxation, answered journalists' questions during the press conference. (Xinhua Photo)

Jin Renqing (2nd L), Chinese finance minister, and Xie Xuren (2nd R), director general of the State Administration of Taxation, answered journalists' questions during the press conference. (Xinhua Photo

Xie Xuren, director general of China's State Administration of Taxation, speaks during a press conference for the Third Session of the 10th National People's Congress (NPC) of China in Beijing, March 9, 2005. Xie and Jin Renqing, Chinese finance minister, answered journalists' questions during the press conference. (Xinhua Photo

BEIJING, March 9 (Xinhuanet) -- China's taxation administration will speed up reform to levy unified income tax on domestic and overseas-funded firms, said top tax official Xie Xuren at a press conference on the sidelines of the ongoing annual parliament session at the Great Hall of the People in Beijing.

"We have to unify income tax for local companies and overseas-invested firms to cater to the new situation brought about by China's entry into the World Trade Organization (WTO) in 2001 and boost fair competition among all businesses," said Xie, director general of the State Administration of Taxation.

China's top legislature, the National People's Congress, has listed the Law on Enterprises' Income Tax in its lawmaking plan for 2005.

NPC deputy Cheng Faguang revealed earlier Wednesday that China might unify the income tax rates in 2008.

"This was in my most optimistic forecast," Cheng, also a member of the NPC Financial and Economic Committee, told Xinhua on the sidelines of the NPC's annual session.

Xie said his administration has carried out in-depth research on the unification with other departments concerned, and would speed up reform of the taxation systems in line with the legislative procedure.

The actual income tax rate has remained at 14 percent for overseas-funded businesses, much lower than the 24 percent for domestic firms, since China formulated the preferential policy for overseas-funded enterprises in mid-1980s in a bid to lure foreign investment.

Experts and local companies have complained the policy does notcomply with WTO principles and as a kind of discrimination against domestic firms, it also results in reduction of China's tax revenues.

China is capable of financing reforms of its state-owned commercial banks, said Finance Minister Jin Renqing on Wednesday at the same press conference.

"We have to pay for the transformation of state-owned banks into joint-stock banks and their asset reshuffle, and the Treasury is ready to foot the bill," Jin said.

Jin said the Finance Ministry has issued 270 billion yuan (32.5billion US dollars) of treasury bonds to boost the banking sector,and will probably finance the separation of an additional 1.4 trillion yuan (168 billion US dollars) of non-performing assets from state-owned banks.

The finance department may also adopt preferential tax policies to support the banks' joint-stock reform, either by allowing the banks to dispose of some non-performing assets before tax payment, or returning to them some of the income tax proceeds. "Whatever measures to be taken depends on the future financial situation," he said.

The Chinese government has spent 45 billion US dollars of its foreign exchange reserves to bolster the balance sheets of state-owned Bank of China (BOC) and China Construction Bank (CCB).

Governor Zhou Xiaochuan of the People's Bank of China, or the central bank, said on Monday the share-offerings and listings of BOC and CCB are "not too far away."

On the issue concerning fiscal policy, Jin said China's decision to shift its fiscal policy from "proactive" to "prudent" this year is in line with the changes in the macroeconomic situation and suits the needs for macro-regulation.

Following the prudent fiscal policy, the government would cut this year's fiscal deficit by 19.8 billion yuan (2.4 billion dollars) to 300 billion yuan (36.2 billion dollars, he said.

Long-term treasury bonds to be issued this year would be 30 billion yuan (3.6 billion dollars) less than last year, continuinga dropping streak to stand at 80 billion yuan (9.7 billion dollars).

Meanwhile, the share of fiscal deficit to the gross domestic product (GDP) would further shrink to an estimated 2 percent this year, 0.5 percentage points lower than last year, the minister said.

The Finance Ministry would spend more T-bond proceeds to agriculture, science, education, culture, health and social security, while promoting tax reforms in the countryside and improving the export tax rebate system.

"We'll vigorously promote the reform and the value-added tax and the unification of income tax for domestic and overseas-funded firms" to improve the investment environment, said the minister.

Implementing the prudent fiscal policy also calls for intensified efforts to increase tax revenue and reduce financial expenditures, he added.

Jin spoke highly of the proactive fiscal policy the government adopted since 1998 in the wake of the Asian financial crisis, saying a total of 910 billion yuan (110 billion US dollars) of long-term T-bonds were issued in the seven years, which contributed 1.5 to 2 personage points to China's economic growth and helped achieve a "soft landing" of the economy.

Despite the achievements, some unhealthy and unstable factors have occurred in China's economic development, said Jin, pointing to the excessive and fast-increasing investment in some industries, the excessive increase of money supply and the huge amount of non-government investment.

To follow the scientific concept of development, "we should boost the development of agriculture, science, education, culture and health, social insurance and other industries," said the minister.

"Under such circumstances, it is completely necessary and possible to reduce the actual investment of the government," he added. Enditem