BEIJING, March 8 (Xinhua) -- The following is the full text of the Explanation on the Draft Enterprise Income Tax Law of the People's Republic of China, delivered by Finance Minister Jin Renqing at the Fifth Session of the Tenth National People's Congress here on Thursday:

    Explanation on the Draft Enterprise Income Tax Law of The People's Republic of China

    (Delivered at the Fifth Session of the Tenth National People's Congress on March 8, 2007)

    Jin Renqing 

    Minister of Finance, People's Republic of China

    Deputies:

    Entrusted by the State Council, I now wish to give you an explanation on the Enterprise Income Tax Law of the People's Republic of China (Draft).

    To improve the socialist market economy and to unify the income tax system for all kinds of enterprises as called for at the Third Plenary Session of the Sixteenth Central Committee of the Communist Party of China, the Ministry of Finance, the State Administration of Taxation and the State Council Legislative Affairs Office worked together and drafted the Enterprise Income Tax Law of the People's Republic of China (version for comments) by taking into account the new developments of China's economy and society. In 2004, written comments were sought from the Financial and Economic Affairs Committee of the National People's Congress (NPC), the Legislative Affairs Committee of the Standing Committee of the NPC, the Budget Affairs Committee of the Standing Committee of the NPC, the people's governments of all provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed in the State plan, and relevant departments of the State Council. Roundtable discussions were also convened among relevant ministries, enterprises and experts respectively to seek their comments. In 2006, comments were solicited again from 32 departments and agencies of the Central Government. The parties concerned generally agreed that it was quite necessary to accelerate the reform of the income taxation system for domestic and foreign-funded enterprises (including Chinese-foreign equity joint ventures, Chinese-foreign contractual joint ventures, wholly foreign-funded enterprises and foreign enterprises, the same as below), and enact and enforce a unified enterprise income tax law as soon as possible to create a uniform tax environment for fair competition among all kinds of enterprises. The Enterprise Income Tax Law of the People's Republic of China (Draft) (hereinafter referred to as the Draft) was then prepared with further revision and improvement on the basis of the views from all parties concerned. After being discussed and adopted at an Executive Meeting of the State Council, the Draft was submitted to the Standing Committee of the NPC on September 28, 2006 for deliberation. The Draft was deliberated at the 25th Meeting of the Standing Committee of the 10th NPC. In January this year, the General Office of the Standing Committee of the NPC circulated copies of the Draft to NPC deputies and organized discussions of the Draft. Members of the Standing Committee and NPC deputies generally held that it is the right time to enact a unified enterprise income tax law and that the Draft is basically feasible. At the same time, they put forward some suggestions to revise the Draft. On the basis of views of members of the Standing Committee and relevant special committees of the NPC and those of NPC deputies, the State Council made more revisions to the Draft and submitted it to the NPC for deliberation. I am now making the following explanation on the Draft:

    I. Necessity and timing for this legislation

    Domestic and foreign-funded enterprises in China are now governed by different legislations on enterprise income tax. Foreign-funded enterprises are governed by the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises (hereinafter referred to as the Tax Law on Foreign-funded Enterprises) adopted at the 4th Session of the 7th NPC in 1991, whereas domestic enterprises are governed by the Provisional Regulations of the People's Republic of China on Enterprise Income Tax (hereinafter referred to as the Tax Law on Domestic Enterprises) promulgated by the State Council in 1993. In order to attract more foreign investment and develop China's economy, a series of tax policies were implemented for foreign-funded enterprises since the adoption of the reform and opening-up policy in China at the end of 1970s, which are different from those for domestic enterprises. Those different tax policies have proved necessary in practice and played an important role in promoting reform and opening-up to the outside world, attracting foreign investment and developing China's economy. By the end of 2006, 594,000 foreign-funded enterprises had been approved nationwide in total and 691.9 billion US dollars of foreign funds used. In 2006, all these foreign-funded enterprises paid 795 billion US dollars in all types of taxes, accounting for 21.12 percent of the total national tax revenue.

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