China's top legislature began discussing Sunday a new law on corporate income that will unify income tax rates for domestic and foreign companies at 25 percent.
 
The draft law was tabled at the 25th session of the 10th Standing Committee of the National People's Congress (NPC), which convenes from December 24 to 29.

A unified tax code will create a taxation environment that favors fair competition among all ventures registered in China, said Finance Minister Jin Renqing at the meeting.

Different corporate income tax rules were established for domestic companies in 1991 and overseas companies in 1993 with overseas companies enjoying a lower tax burden. In recent years, this system has been hotly debated.

Chinese companies currently pay income tax at a nominal rate of 33 percent, while their foreign counterparts -- who benefit from tax waivers and incentives to encourage investment in China -- pay an average of 15 percent.

In fact, when all kinds of tax breaks and incentives are taken into account at both national and local level, domestic companies pay around 24 percent and overseas-funded businesses 14 percent. Many people believe that the gap is a disadvantage to domestic players who have been facing tougher competition since China joined the World Trade Organization in 2001.

(For more biz stories, please visit Industry Updates)