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SZ braces for impact of tax reform
Latest Updated by 2007-03-22 11:35:31
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The newly passed corporate tax law will have a major impact on Shenzhen, but the city will cushion the impact by spearheading more reforms, officials said.

According to Enterprise Income Tax Law that was passed at the national people's congress last week, foreign-invested companies will have to pay income tax at the rate of 25 percent, up from their current preferential tax rate of 15 percent.

The new law will make mainland's corporate tax rate higher than that of Hong Kong, which is 16 percent. Under the new measure, foreign companies that presently qualify for tax breaks will be allowed to keep them for up to five years.

In a government meeting held Tuesday, Shenzhen Party chief Li Hongzhong described the tax reform as a "milestone" for the special economic zone.

"We are going to say farewell to a stage of preferential policies and enter a new stage of 'self-made' advantages," Li told the meeting.

Acknowledging that the tax reform will have a certain amount of negative impact on Shenzhen, which relies heavily on foreign investment, Li said: "there are opportunities behind the challenges." Shenzhen will reduce the fallout from the new tax law by introducing more reforms and innovations, changing the mode of development, and improving services for investors, he said.

In an interview with Shenzhen Daily yesterday, Vice Mayor Zhuo Qinrui said foreign investors were actually well prepared for the new tax law. "Foreign investors pay more attention to the investment environment. So the most important thing is to create a good environment for the companies," Zhuo said at the sidelines of the ongoing municipal people's congress.

Zhuo's thoughts were echoed by Brian Davidson, consul general of the British Consulate General in Guangzhou. In an interview with Shenzhen Daily yesterday, Davidson said while the higher tax rate could force some companies to move elsewhere, Shenzhen's competitive advantages, including its location, its highly skilled work force, and good infrastructure, would make it worthwhile for most companies to stay on.

"British companies are waiting to see how the government will respond to the change. They will be happy to compete equally with local companies," said Davidson.

Editor: Yan

By: Helen Deng Source: Szdaily web edition
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