Taxes paid by man­u­fac­tur­ers called ‘fair’

Of­fi­cials cite dis­sim­i­lar poli­cies af­ter a Chi­nese com­pany opens a fac­tory in the United States

China Daily (Hong Kong) - - TOP NEWS - By WANG YANFEI wangyan­fei@chi­nadaily.com.cn

It is “ab­surd” to blame the Chi­nese busi­ness tax sys­tem for a large glass man­u­fac­turer mov­ing part of its op­er­a­tion to the United States, a se­nior of­fi­cial with the na­tional tax bureau said on Thurs­day.

“China’s busi­ness tax level is fair com­pared with other coun­tries, and it has not im­posed high taxes that threaten the op­er­a­tion of man­u­fac­tur­ing com­pa­nies,” said a se­nior of­fi­cial with the State Ad­min­is­tra­tion of Tax­a­tion, who de­clined to be named due to the sen­si­tiv­ity of the is­sue.

He com­mented fol­low­ing me­dia re­ports quoted Li Weiguang, a pro­fes­sor at Tian­jin Univer­sity of Fi­nance and Eco­nomics, as say­ing that man­u­fac­tur­ers find it hard to make profit un­der a com­bined tax­a­tion bur­den of close to 40 per­cent.

The re­port fol­lowed moves by Cao De­wang, chair­man of auto glass man­u­fac­turer Fuyao Group, to in­vest $600 mil­lion in man­u­fac­tur­ing in the US state of Ohio, in part to take ad­van­tage of lower US taxes and op­er­at­ing costs such as land and elec­tric­ity. Fuyao com­pleted work on a large plant there in Oc­to­ber.

In an in­ter­view with China Busi­ness News last week, Cao said the over­all tax cost for man­u­fac­tur­ers in China is 35 per­cent higher than in the United States.

The de­ci­sion caused heated dis­cus­sion at a time when US pres­i­dent-elect Don­ald Trump has pledged to im­pose high tar­iffs on Chi­nese prod­ucts. Trump also has said he con­sid­ers China a cur­rency ma­nip­u­la­tor.

Li Wanfu, a re­searcher with the Tax Science Re­search In­sti­tute un­der the tax­a­tion ad­min­is­tra­tion, said a lack of un­der­stand­ing of the dif­fer­ent tax­a­tion sys­tems in the two coun­tries has led to mis­con­cep­tions.

In China, more than 90 per­cent of taxes and fees come from en­ter­prises, with lit­tle com­ing from per­sonal in­come tax, ac­cord­ing to Li Wanfu. But in Western coun­tries, the di­rect tax bur­den on en­ter­prises is lower since a large pro­por­tion of govern­ment in­come comes from per­sonal in­come tax and so­cial in­sur­ance pro­grams.

The In­ter­na­tional Mon­e­tary Fund says China’s cor­po­rate in­come tax rate, which is 25 per­cent, is higher than the world av­er­age of 23.7 per­cent. But Li Wanfu says the na­tion’s over­all tax bur­den, at around 30 per­cent, is far lower than the 42.8 per­cent av­er­age in de­vel­oped coun­tries, ac­cord­ing to Li.

“China is ac­tively im­ple­ment­ing tax­a­tion re­form, and its only move would be to lower the tax bur­den on busi­nesses,” said Li. He cited im­ple­men­ta­tion of val­ueadded tax re­form, which of­fi­cials es­ti­mated would re­duce the tax bur­den for en­ter­prises by 500 bil­lion yuan ($73 bil­lion) by the end of 2016.

The ad­min­is­tra­tion plans to so­lid­ify its value-added tax mea­sures into law dur­ing the 2017 leg­isla­tive ses­sions, ac­cord­ing to of­fi­cials.

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