TNAG-2792-FCO40-4031-Relations-between-Hong-Kong-and-China-1993 — Page 7

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initially be excluded from the new tax system, but would in future be subject to a uniform turnover tax (which would also

apply to domestic enterprises); this would replace the current

consolidated industrial and commercial tax on foreign-funded

enterprises. Three major tax items would apply under the turnover tax category: value-added tax, consumption tax and

business tax. The former would apply to production, wholesale

and retail sales and imported commodities. A small number of commodities, such as tobacco products, alcohol, gasoline, diesel oil, cars and luxury cosmetics would be subject to a consumption

tax on top of VAT. Service sectors including transportation,

insurance, post and telecommunications, construction and entertainment, but excluding commodity wholesale and retail

sales, would be liable to business tax. A value-added tax on

land and new taxes on securities trading, legacies, gifts and

urban construction maintenance would also be introduced.

Personal income tax rates would range from 5% to 45%, but there

would be concessions for foreigners and people from Hong Kong,

Macau and Taiwan.

A7.

C

Despite the renewed emphasis on rapid development, the rapid rise in imports far faster than exports and the

continuing high rate of inflation, despite a slight reduction,

are likely to remain causes of concern to many senior officials. The year on year inflation rate in 35 large and medium sized cities in September was 20.7%, compared with 23.3% in July. The

growth in investment by state units for the third quarter stood at 61.7% compared with 70.7% for the first six months of this

year. Urban residents' earnings for the year until October rose by an average of 29%, or 12% taking account of inflation, according to the State Statistics Bureau (CD 20 Oct).

G.F. 324

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