CONFIDENTIAL
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TAX RATES
Mr Chen said that they KEC officials thought the taxes
5% and 5%) too high, but it was a matter over which they could
exercise no control. He promised to bring this up with the relevant authorities. It is worth noting that this was not the first time that KEC executives expressed concern about this aspect of joint venture which might have chilling effect on foreign investors.
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However, he argued that KEC's proposed tax rate of 20%
might be too low.
In the afternoon session he suggested that KEC feed tax rate 30% into their computers and collate the results.
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An Economics Subcommittee member, a Mr Chang, said that the Chinese Taxation authorities had explained that similar tax laws in some Sotheastern Asian countries governing joint ventures stipulated even higher rates.
20% RMB LOANS
Time and again Mr Chen wrote off the possibility of contracting such loans domestically, the reason being the lack of money as a result of the Four Modernizations when at the same time there were many projects vying for financial support from the government!
as externally.
In short, money was tight, both internally as well
Twice at the meeting Mr Chen suggested that the NPS get more foreign loans to cover the 20% earmarked for domestic: RMB loans. He said that while he would take up the matter with higher-up authorities, the Feasibility Study should proceed under the assumption that 20% RMB loans was an impossibility.
He said that in the years ahead, when the Four Moderni- zations would have improved China' balance of payments position, she would find it possible to pay off her loans. One such source of foreign currency would be by selling electricity to CLP.
ON GETTING FOREIGN LOANS THROUGH CLP
Mr Chen said the time was ripe for CLP to approach overseas and H.K. financial institutions for the purpose of negotiating loans and get to know the terms of these loans. gave their consent.
REPAYMENT PERIOD
KEC
CONFIDENTIAL
When KEC learned of the proposed 10-year repayment period, they asked if it could be extended to 15 years. Mr Stones observed that it was no bad idea to borrow money and redeem a loan later with inflationary money, Mr Chen said the merit of making loans was dependent on the interest rate. If the interest
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