Shanghai Free Trade Zone in Pudong expansion embarrassing case of taxation hard to pull carts

Posted on 7/2/2015 1:59:19 PM

After the expansion, Shanghai FTA face more challenges, the most typical is the current taxation system FTA.
21st Century Business Herald reporter recently changed from the first test China free trade area on the governance of government functions and Innovation Forum has learned the financial system FTA feel the pressure to make the Pudong New Area - "Pudong financial 'pony' pull them from Free Trade Area of the 'cart'. "
As for whether the FTA should implement tax incentives, is also facing a "double embarrassment": Yes, it means a new round of China's unfair competition between regions; no, they represent a loss of business, which in turn seriously affect the trade District of deepening reform exploration mission.
Small horse cart
Many participants in the system who said in his speech, is not smooth and taxation system has to operate Shanghai FTA had an impact.
Under the existing management system, Shanghai FTA expenditure is borne by the Pudong New Area, but the creation of a free trade zone in Pudong New Area of the sources of revenue are not home.
21st Century Business Herald reporter learned from the forum, the issue of free trade zone financial system is first cadre management level and financial level does not match.
Participants sources, the principal leaders of the FTA is the management of cadres in Shanghai, but to ensure its functioning financial commitment by the Pudong New Area, which means that the FTA some cadres wages are received from municipal finance, some from Pudong New.
Bring the corresponding question is, FTA to "a government" way to do things, and the Pudong New Area this "a government" as "a division" to implementation of the budget, resulting in a long process of budget management, and a It does not match the government's institutional process of doing things.
Lengthy budget process, it is because the executive branch budget, Pudong this approval is very strict.
In addition, it is not matched with spending powers. Pudong New Area, it is a typical "small horse cart." From GDP, the self-expansion of the total trade zone after Shanghai reached 160 billion, but only 60 billion Pudong New Area.
In fact, since the reform and opening up the birth investigate various development zones across China, there are basically three modes: financial allocation formula, the institutional budget (level of government, more), innovative budget management.
There are scholars participating in the 21st Century Business Herald reporter said that in the innovative way in budget management, the public portion of the higher-level functions of the Government's commitment to fiscal spending, involving investment and other institutional market or the use of "into" .
On the current FTA how to break through the financial system, the scholars put forward a solution.
From the short term, the question of money, using innovative "sectoral system" approach is more secure, the Pudong New Area should FTA "special office", giving FTA maneuvering funds, allowed flexible domination, but only if FTA itself must increase the transparency of public information, and accept the supervision more social forces.
In the medium term, efforts to match the powers and expenditure responsibilities, the reform of taxation system, for example, related to customs and other central institutions directly under its expenditure should be borne by the central government.
From the long-term perspective, the FTA should be included in the Shanghai financial fiscal management and democratic decision-making mechanism set up district, Shanghai and regional enterprises, the changing functions, expand services.
Are Shanghai FTA should enjoy preferential tax policies also in dispute.
Development patterns from the past, the place to take a more corporate income tax from 33% to 15%, thus forming a policy of depression.
But the central indication that Shanghai FTA do not do "special zone", Shanghai FTA to actively study and improve, "does not lead to the transfer of profits, erosion of the tax base to adapt foreign equity investment offshore business tax policy."
Shanghai Party Secretary Han Zheng also pointed out that the FTA is experimental field plots country, not the place; institutional innovation high ground, not the policies of depression; the nursery, not bonsai.
Dean of the Institute for Public Policy and Governance Shanghai University of Finance and Hu Yi Jian this explanation, for Shanghai Free-Trade Zone, this is the "no tax incentives, but to explore tax policy."
In addition, the birth of the carrier Shanghai FTA is special customs supervision area, the "territory" shall be exempted from import duties, but the focus is still the tax.
In Shanghai Waigaoqiao Free Trade Zone, the opening of overseas investment focused on "trade in goods", but FTA exploration is "service trade, finance and investment", and must be executed with low tax rates, both in essence there different.
Hu Yi Jian said, Shanghai Free Trade Area from 28 square kilometers to 120 square kilometers after the expansion, there will be a non-bonded area, then the difference between the bonded area and the non-bonded Where? What is the difference from outside the free trade area with the FTA is? What is the difference between a free trade zone with the outside is?
Distinguished Professor of Shanghai University of Finance and Liu Xinli believes that if you do not innovate and execute low tax rates in accordance with international practice, then, foreign equity investments and offshore business will suffer great embarrassment: "Business will naturally flow into Hong Kong, Singapore and other places, Shanghai people do not need you to engage in a free trade zone. "
But once the use of low tax rates, it could lead to a new round of competition among unequal region, and with the FTA contrary to the spirit of reform.
According to the 21st Century Business Herald reporter was informed, Shanghai Finance Bureau on the "offshore business, foreign equity investments" and has done a policy reserve, but the Ministry of Finance's attitude is still "cautious."

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