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China plans to unify corporate tax rate

China plans to unify its tax code by 2006 raising rates for foreign investors and lowering them for domestic companies.

The government plans a unified tax rate of between 24% and 28%; overseas companies currently pay 20% while the domestic rate is 33%.

Foreign direct investment in China totalled $54 billion in 2003, while contracted foreign investment rose to $943 billion. Chinese companies have been pressing for change claiming the existing tax code gives foreign companies a competitive edge, and certainly China has given preferential tax rates for corporates such as Motorola in order to attract expertise to the country, but that is set to end as early as 2006 following approval by China's lawmakers.

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