To meet the requirements of the World Trade Organization (WTO), the government is pushing ahead with policies encouraging the development of the software industry, a senior official from the Ministry of Information Industry said.
"We should do the planning for the development of the software industry in the 11th Five Year Plan (2006-10) well and actively push the legislation of the State Council's circulars 18 and 47 into laws or regulations to meet the rules of the WTO," said Lou Qinjian, vice-minister of the information industry, at the opening of the ninth China International Software Exhibition.
The State Council released Circular 18 in August 2000, which encourages the development of software and integrated circuit (IC) industries through government funds, procurements, financing, engineer training and tax rebates.
It sets a value-added tax rate of 17 per cent for software and IC companies, compared to 33 per cent for most other industries, but software and IC companies can also get the extra taxes back, if their actual value-added tax burden exceeds 3 per cent.
They can also get reductions or exemptions from income taxes and import taxes for major equipment.
However, tax rebates for the IC industry provoked complaints from the United States, European Union and Japan, which claim they run contrary to WTO rules and are unfair to foreign companies.
After rounds of negotiations, the government decided to cancel the tax preference for the IC industry from April, although full tax rebates on exports still stand.
Circular 47 from the State Council, released in July 2002, outlined goals and policies for the development of the software industry.
The sector, which has limited exports and accounts for just 3 per cent of the global total, has not been complained about by other countries, but the government nevertheless has decided to revise its approach under WTO principles.
The two circulars, especially No 18, have played a significant role in the development of the domestic software industry.
Zhang Qi, director-general of the department of electronics and information products under the MII and a strong supporter of the development of the domestic software industry, said software companies had received 12 billion yuan (US$1.45 billion) in value-added tax rebates by the end of 2004.