CHINA'S State Council, or the Cabinet, passed a draft of regulations aimed at helping to enforce the country's new corporate income tax law.

It is necessary to draw up the regulations to ensure the implementation of the new law, which will come into effect on January 1 next year. After further revisions, the regulations will be promulgated by the State Council.

According to the draft, the income tax rate for foreign companies in special bonded zones, which previously enjoyed a preferential rate of 15 percent, will rise in stages to 18 percent, 20 percent, 22 percent, 24 percent and finally 25 percent, the same as domestic companies, over five years.

It will be the first time since 1978 that China has put domestic and foreign firms on an equal footing for income tax purposes in an effort to promote fair competition.

The arrangement would apply to such bonded zones as Shenzhen Special Economic Zone, economic development zones set up in coastal cities like Hongqiao Economic and Technological Development Zone in Shanghai, and high- and new-tech development zones including Zhongguancun Science Park in Beijing.

However, foreign companies that have tax holidays, which provide for five tax-free years and another five years of up to 50 percent reduction, will retain the concessions for the full 10 years before facing the new higher rates.

The 15-percent rate will be retained until 2010 for foreign companies that invest in the central and western regions of China, an apparent effort by the government to redress regional economic imbalances.