Taxes paid by manufacturers called ‘fair’

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

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.