China Should Adapt to Support Global Tax Rules, Ex-Official Says
(Bloomberg) -- China should conduct targeted research and propose fiscal and taxation plans in response to new global rules to set a minimum corporate tax, according to a former taxation official.
Beijing needs to act in order to minimize the negative impact on the investment environment of foreign businesses in China and defend the country’s taxation rights and interests, said Liao Tizhong, former director general of the State Administration of Taxation’s International Taxation Department.
China should analyze the economic impact of the policy in advance, be prepared to amend laws, and start building technology infrastructure as early as possible, Liao wrote in an article this week in International Taxation in China, a publication under the State Taxation Administration.
In July, 130 countries backed a plan led by the Organisation for Economic Cooperation and Development to set a minimum corporate tax rate of at least 15% and countries where big firms operate would get the right to tax between 20% to 30% of profits exceeding a 10% margin. The overhaul is aimed at curtailing tax avoidance by making global enterprises, with implementation targeted for 2023.
The 20% is revolutionary and progressive and is “the first step in the Long March,” Liao wrote, adding that the rate could later be raised to 40% and even 50%. For the international community, it marks “an important step towards fairness in the international tax system” and will likely lead to progress in politics, economy, law, governance, and technology, he said.
China has a basic corporate tax rate of 25% for most companies, but reductions for sectors like high-tech and for investment in research and development mean the rate could be lowered to below 15%.
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