HOLDING THE LINE
The more Asian taxes change, the more they stay the same.
From EIU reports

“Don’t ask me what I want it for, if you don’t want to pay some more,” sang the Beatles in a caricature of the greedy, universal taxman. In recent years Asia’s governments have been glad to risk being associated with this image, balancing tax competitiveness with the need to fatten the coffers and address fiscal woes or spend on infrastructure and social welfare programs. This has boosted the regional average on corporate tax to 29.99%.

Across the board major tax jurisdictions are holding the line. Chinese officials have long promised sweeping tax reforms, but even relatively minor adjustments to the system are being implemented at a painfully slow pace. For example, various government agencies have proposed that a uniform tax rate be established between 24% and 26%. Such a reform would mean the abolition of tax holidays and preferential tax rates for foreign-invested enterprises and for firms investing in special economic zones (SEZs) and other free-trade zones. A tax regime favoring particular industries, regardless of ownership, will probably replace preferential rates that discriminate on the basis of ownership.

Japan is going the other way. The budget for fiscal year 1999/2000 paved the way for reductions to 30% (from 34.5%) in the standard national corporation tax, and to 9.6% (from 11%) in the local enterprise tax rate. As a result, the combined effective tax rate declined to 40.87% (from 46.36%). But these cuts were part of the country’s economic revitalization effort, not permanent reductions in the corporate tax burden. Depending on the economic climate, corporates can rise again in the future.

Meanwhile, Indian policymakers seem to want higher taxes and lower taxes at once. The 2005/06 budget, announced in February, cut the corporate tax rate for domestic companies from 35% to 30%, but it increased an across-the-board income-tax surcharge on domestic corporations to 10% from 2.5%. The effective tax rate for domestic companies dropped from 36.59% to 33.66%. For branches of foreign companies, the budget left the tax rate and surcharge unchanged, so the effective tax rate remained at 41.82%.

Stay tuned as the government, at the urging of such companies as Reliance, Mahindra, Infosys, Wipro, Biocon, and Bharat Forge, consider the idea of Chinese-style special economic zones (SEZs). Proposals over how this will work are being debated in the finance ministry, amid some skepticism that, given Indian labor laws and regulations governing land acquisition, it will work with anything like the blazing speed that characterized the rise of China’s SEZs.