prevent con artists from inserting themselves between you and your customers is to make sure that customers can
easily tell the difference between dealing
with your business and dealing with a
fake one. A good way to do that is to
exchange hard-to-counterfeit information
that only you and the customer know
of. You could provide a review of the
customer’s last purchase or a reference
to something that the customer has
been looking at on your site, or the customer could share a photo only he could
have taken, to adorn every page he looks
at on your site. Second, make frontline
employees a critical part of security,
giving them both tools and incentives
to raise red flags, because they, and not
the members of the executive team,
are going to be the targets of business
cons. Finally, collaborate with other businesses. This will require sharing information and solutions, rather than trying to
solve the problem quietly.
Clay Shirky ( clay@shirky.com) is the author
of Here Comes Everybody (Penguin Press,
2008), a book about social media. He
teaches in New York University’s graduate
Interactive Telecommunications Program.
Reprint F0806D
many firms that have been paying deeply
discounted rates. For those companies,
the law will have the effect of increasing
taxes by up to 25% over the next five
years. In addition, China will place multinationals under greater scrutiny as
it seeks to ensure that it’s getting its
share of the wealth generated by the
country’s economic boom.
The new tax regulations also form a
map, of sorts, showing how the Chinese
authorities plan to transform the country:
China wants to improve its transport
infrastructure. It is looking for more high-tech jobs for its engineers. It wants to
green its industry. And it hopes to dispel
its image as a manufacturer of cheap
products and become a provider of high-quality, high-margin goods.
The country is providing tax incentives to make all this happen. Of course,
the authorities may tweak the rules for
months to come – there’s no telling what
exact shape the regulations will eventually take. It’s crucial for firms wishing to
benefit by assisting in the transition
to be sure they’re relying on the most
up-to-date official guidelines.
That said, here are a few general
things multinationals can do to take
advantage of the tax breaks. Some may
require a willingness to diversify or alter
operations in China.
Do research. Some of the biggest
tax breaks have been reserved for multinationals engaged in qualified R&D
activities in China.
Repave, reuse, recycle. A foreign
company with a qualifying infrastructure,
environmental, or recycling business in
China may be eligible for a three-year
tax exemption and a subsequent three-year rate reduction, according to official
guidelines. Even companies without
such businesses may be able to benefit
from tax credits if their Chinese operations set up initiatives that protect the
environment, save water, or produce
safety equipment.
Sow, reap, go fishing. Companies
engaged in agricultural, forestry, animal
husbandry, and fishery activities may
qualify for lower rates.
Go high-tech. Lower rates also may
be available for new high-technology
firms in China that own intellectual property and employ knowledge workers.
Companies should also take the following steps to limit their tax exposure
and avoid the risk of triggering a Chinese audit:
Mind the ex-pat head count.
The presence of a multinational’s non-Chinese employees in the country for
more than 180 days a year could prompt
the authorities to classify the MNC – not
TAX INCENTIVES
Tapping Hidden
Opportunities in
China’s New Tax Law
by Jeff Olin and Gary James
A new Chinese law has erased many
of the previous tax benefits for foreign
firms, but it also offers abundant opportunities for multinationals that are willing
to help transform the country into a more
sophisticated – and greener – producer of
high-end goods.
For many foreign firms, the law, which
took effect this year, will inevitably
increase the cost of doing business in
China. It sets a single corporate income
tax rate of 25% for all foreign and domestic companies – low by other countries’
standards (the U.S. rate is 35%, for example) but a shock to the system for the
