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China aims for more level playing field with two landmark laws
2007-03-17
China passed two landmark laws Friday that aim to bring more equality to a fast developing society, with parliament approving key legislation on private property only after unprecedented debate. The Property Law will seek to level the playing field between the private and the state-owned sector while the Corporate Income Tax Law will erase some of the privileges that foreign firms enjoy over local enterprises. "In the past, we were concerned about creating growth, even if it meant inherently unfair policies. Now the emphasis is more on fairness," said Yan Jirong, a professor at the School of Government at Peking University. The Property Law went through a record 13 years of debate, passed seven readings and has been the subject of criticism and proposals from 47 government departments and an unprecedented 11,500 members of the public. However China's parliament is regarded as a rubber stamp body for the communist rulers and 96.9 percent of lawmakers voted for it on Friday, reflecting the official view that the time had finally come for it to be passed. Supporters of the Property Law say it will protect private companies against economic crime, such as embezzlement by their own staff. Opponents argue the law will help corrupt officials and other lawbreakers protect their ill-gotten gains. It has been under especially vicious attack from old-school Marxists, who consider it a sell-out pushing China dangerously close towards the capitalist camp. The majority view, however, seems to be that China needs a law like this to define who owns what as the fast growing economy throws up new challenges. For example, murky definitions about who owns what assets at the heart of some of modern China's most serious conflicts, such as bloody clashes over land use rights in the countryside. "The average citizen wants to see the law passed, mostly because of its effects on dispute-prone matters such as the individual's rights in relocation for urban development programs," the state-run China Daily said in a recent editorial, referring to one of the most contentious sore points. When the Constitution was amended in 2004 to enshrine the broad principle of private property protection, there was far less debate. Some observers have argued that the heated discussion the Property Law triggered as it moved closer to being approved reflected growing discontent with the inequality that economic reform has created in recent years. The Enterprise Income Tax Law, meanwhile, which passed with 97.8 percent of the votes, has triggered less controversy, even though it will add billions of dollars to the total tax bill paid by foreign companies. It will force most foreign-invested companies to eventually pay 25 percent of their income to the government, compared with the currently preferential 15 percent rate and the 33 percent levied on Chinese firms. "It has become evident that preferential income tax rates for foreign-funded companies now amount to unnecessary discrimination against domestic enterprises," the China Daily said in another editorial. "To unify the corporate tax rate ... will make the country a level playing field for the enterprises," the China Daily said. A unified tax rate has been expected since China entered the World Trade Organisation in late 2001 as the trade body does not permit this type of discrimination among enterprises. If the new tax law is implemented in 2008, the foreign-funded enterprises' income tax bill will increase by 41 billion yuan (5.3 billion dollars), according to estimates from the government.
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