Tax change means level playing field for foreign, domestic companies
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The government is phasing in the increases over five years, with foreign companies paying 18-percent in 2008, 20 percent in 2009, 22 percent in 2010, 24 percent in 2011 and 25 percent from 2012, although some discrepancies may exist due to local government preferences.
"Considering the fact that some foreign firms in China make fast profits, the new taxation will not add much to their cost burden," Zhang said.
He added both the city construction and maintenance tax and education-supporting tax were based on the total amount of consumer tax, value-added tax, and business tax that companies paid.
Currently, China has a 7 percent rate for the city and construction maintenance taxes at the municipal level, 5 percent at county level, and 1 percent at other lower levels, while the rate for education-supporting taxes is 3 percent.
Net profit of China's leading auto-maker SAIC Motor Corp., for instance, jumped more than 900 percent year on year in 2009, but a major part of the sales had come from its ventures with the U.S.-based GM and Europe's Volkswagen.
Zhang also said the introduction of the new taxes did not mean the environment to invest in China was worsening, adding taxes were not the only thing companies looked at when investing in China.
"It also depended on the country's huge population of 1.3 billion, its huge market, and growth potential," Zhang said.
Liu Kegu, former China Development Bank vice president, said recently that China remained an attractive foreign investment destination due to its high economic growth, political stability at home, huge consumer market, and abundant labor resources.
Figures from the country's Ministry of Commerce show foreign direct investment (FDI) into China increased 7.86 percent year on year in October to 7.663 billion U.S. dollars, rising for the 15th consecutive month.
Inbound FDI for the first 10 months of the year totaled 82.003 billion U.S. dollars, a year-on-year increase of 15.71 percent, indicating China remains a favored investment destination for foreign businesses.
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