Unification of corporate income tax is in line with the market law and won't upset foreign investment, Commerce Minister Bo Xilai said at the NPC closing meeting on March 16, reported the China Security Journal Monday.

Bo said the preferential rate for foreign-financed companies is rational as it helped siphon overseas investment to fuel the nation's economy growth, and the unification will bring the foreign capital utilization to a higher stage.

According to him, the income tax is but a factor, and the foreign investors will take account of other factors, such as infrastructure, science capacity, support services, and investment environment before making up their mind to go to China.

The new Corporate Income Tax Law will take effect on January 1, 2008, and sectors such as the high-tech industry and small, low-profit companies will still enjoy preferential rates.

The rate for high-tech companies will remain at 15 percent and that for small, low-profit firms will be 20 percent.

Foreign companies will be given a five-year phase-in period, and their burden will increase gradually from 15 percent to 25 percent.

Finance Minister Jin Renqing predicted early this month that after the transition period, foreign companies are expected to pay 43 billion yuan (US$5.5 billion) more in corporate income tax than they do now.

Under the old system, new foreign investors were exempt from income tax for the first two years, and would get a 50 per cent off for the following three years, while Chinese companies had to hand in 33 percent of their profit to cover the income tax.

The old system had long come under heavy criticism for its unequal treatment.