Article 1  These Regulations are formulated with a view to adapting the
industrial and commercial taxation system to the conditions of socialist
economy, promoting the growth of production, ensuring the supply of funds
for the national construction, and simplifying the taxation system by
incorporating the commodity tax, the commodity circulation tax, the business
tax, and the stamp tax into the consolidated industrial and commercial tax.

    Article 2  All units and individuals engaged in the production of
industrial products, the purchase of agricultural products, the importation
of foreign commodities, commercial retailing, communications and
transportation, and various kinds of service trades are taxpayers of the
consolidated industry and commercial tax, and shall be subject to  paying
the consolidated industrial and commercial tax in accordance with the
provisions of these Regulations.

    Article 3  The categories of items subject to consolidated industrial
and commercial tax and the rates of tax are provided in the appended Schedule
of Taxable Items and Tax Rates. Any necessary additions to, decreases in or
adjustments to the individual categories of items subject to tax or the rates
of taxation shall be determined by the State Council and shall be implemented
upon promulgation.

    Article 4  Taxpayers engaged in the production of industrial products
shall compute the tax, after the sale of such products, at the specified rate
based on the amount of gross income derived from the sale.

    Products manufactured and used by an industrial enterprise in its own
production shall not be subject to tax. However, where such products are
subject to tax according to the Schedule of Taxable Items and Tax Rates of
these Regulations, such products shall be treated in accordance with the
provisions.

    Article 5  Taxpayers engaged in the purchase of agricultural products
shall compute the tax, after the purchase of such products, at the specified
rate based on the amount paid for the products.

    Article 6  Taxpayers engaged in the importation of foreign goods shall
compute the tax, after the importation of such goods, at the specified rate
based on the amount paid for the imported goods.

    Article 7  Taxpayers engaged in commercial retailing shall compute the
tax, after the sales of such goods, at the specified rate based on their
income derived from such sales.

    Article 8  Taxpayers engaged in communications and transportation and
various kinds of service trades shall compute the tax, after receipt of
income, at the specified rate based on the amount of their business income.

    Article 9  With respect to products processed by an industrial enterprise
based on consignment, the consignor shall pay the tax. Where the consignor is
an industrial unit, the tax shall be paid in accordance with the provision of
Article 4 of these Regulations. Where the consignor is not an industrial unit,
the tax shall be paid by the consignee on behalf of the consignor at the time
when the products are delivered, or by the consignor, upon its acceptance of
delivery of the products.

    Article 10  The business income of State banks, insurance undertakings,
agricultural machinery workshops, and medical and health institutions as well
as the income or scientific research institutions derived from experiments,
shall be exempt from the consolidated industrial and commercial tax.

    Article 11  Where tax incentives are deemed necessary, tax reductions or
exemptions may be granted with respect to income from public canteens and
other public services operated independently by agricultural production
cooperatives or urban community organizations; income derived from purchase
and sale operations performed by supply and marketing departments of
agricultural production cooperatives on behalf of state enterprises; and
income derived by schools from the production activities of work-study
programs.

    Article 12  Where tax reductions, exemptions and changes regarding the
stage at which the tax is assessed on particular products are within the
administrative district of the respective provinces, autonomous regions, or
municipalities directly under the Central Government, the matter shall be
regulated by the people’s councils of the provinces, autonomous regions, or
municipalities directly under the Central Government in accordance with the
authority granted to them by the State regarding the administration of
taxation. Where tax reductions, exemptions and changes regarding the stage at
which tax is assessed on particular products are of national scope, the matter
shall be regulated by the Stare Council.

    Article 13  Taxpayers and tax authorities should bring into full play the
spirit of cooperation in dealing with taxation matters. Taxpayers shall pay
their tax correctly and promptly, and voluntarily provide tax authorities with
all necessary information. Tax authorities shall actively assist taxpayers in
the payment of tax and promptly respond to suggestions put forward by
taxpayers regarding improvements in taxation.

    Article 14  The tax authorities shall, taking into account the amount of
tax payable and the operational circumstances of the enterprise concerned,
determine the time limit for the payment of tax on an individual basis.

    Article 15  Where a taxpayer fails to make tax payment within the
prescribed time limit, the tax authorities, in addition to setting a new time
limit for the tax payment, shall impose a late payment fine of 0.1%
of the amount of tax due for each day the tax is overdue, commencing from the
first day on which the tax is overdue.

    Article 16  Where a taxpayer evades or neglects any payment of tax, the
tax authorities may, in addition to pursuing the payment of tax, subject the
taxpayer to criticism or impose a fine not exceeding five times the amount of
the tax due according to the seriousness the offense. Cases of  gross
violation shall be submitted to the people’s courts for disposal.

    Article 17  The people’s councils of provinces, autonomous regions and
municipalities under the Central Government shall, in accordance with the
authority granted to them by the State regarding the administration of
taxation, separately formulate measures for taxation as to the assessment of
consolidated industrial and commercial tax on agricultural production
cooperatives, individual members of agricultural production cooperatives,
individual farmers, capitalist industrial and commercial enterprises still in
existence, individual handicraftsmen, small traders and pedlars and
unregistered-commercial businesses and submit such measures to the State
Council for the record.

    Article 18  The rules for the implementation of these Regulations shall be
formulated by the Ministry of Finance of the People’s Republic of China.

    I.Industrial and Agricultural Products (Note 1.)

  ———————————————————————-

  |       Taxable Items         |  Tax Rates  
|       Remarks         |

  |—————————–|————–|———————–|

  | Cigarettes:                 |              |                      
|

  |   Class A                  
|     69%      |                      
|

  |   Class B                  
|     66%      |                      
|

  |   Class C                  
|     63%      |                      
|

  |   Class D                  
|     60%      |                      
|

  |   Class E                  
|     40%      |                      
|

  |—————————–|————–|                      
|

  | Cigars                      |    
55%      |                      
|

  |—————————–|————–|                      
|

  | Cut tobacco                 |    
40%      |                      
|

  |—————————–|————–|                      
|

  | Smoked leaf tobacco         |     50%      |                      
|

  |—————————–|————–|                      
|

  | Unsmoked leaf tobacco       |     40%      |                      
|

  |—————————–|————–|                      
|

  | Wines and spirits brewed    |              |  An
enterprise shall  |

  | from grains:                |              |  be
subject to tax for|

  |  White spirits, yellow rice |              |  wines
and spirits    |

  |  Wine                      
|     60%      |  produced by itself   |

  |  Beer                      
|     40%      |  and used for its own |

  |  Sweet rice wine            |    
40%      |  production, at the   |

  |—————————–|————–|  prescribed tax rates.|

  | Wines made from non-grain   |              |                      
|

  | substitutes                 |    
20%      |                      
|

  |—————————–|————–|                      
|

  | Wines brewed from fruit     |     30%      |                      
|

  |—————————–|————–|                      
|

  |Reprocessed wines and spirits|     30%      |                      
|

  |—————————–|————–|                      
|

  | Alcohol:                    |              |                      
|

  |  Alcohol made from grains   |     30%      |                      
|

  |  Alcohol made from non-gram |              |                      
|

  |  substitutes                |    
20%      |                      
|

  |  Alcohol made from wood     |     20%      |                      
|

  |—————————–|————–|                      
|

  | Sugar:                      |              |                      
|

  |  Machine-processed sugar    |     44%      |                      
|

  |  Unrefined sugar            |    
39%      |                      
|

  |  Saccharin                  |    
44%      |                      
|

  |  Maltose                    |    
27%      |                      
|

  |—————————–|————–|                      
|

  | Tea                        
|     40%      |                      
|

  |—————————–|————–|                      
|

  | Cereals                    
|      4%      |                      
|

  |—————————–|————–|                      
|

  | Wheat flour                 |    
10%      |                      
|

  |—————————–|————–|                      
|

  | Vegetable oils              |   12.5%      |                      
|

  |—————————–|————–|                      
|

  | Sea foods:                  |              |                      
|

  |  Sea cucumbers, fish maws,  |              |                      
|

  |  sharks’ fins, fish lips,   |              |                      
|

  |  abalone, dry scallops      |     35%      |                      
|

  |  Other sea foods            |      5%      |                      
|

  |—————————–|————–|                      
|

  | Fresh water products:       |              |                      
|

  |  Fishes, shrimps, crabs     |      5%      |                      
|

  |—————————–|————–|                      
|

  | Tremella, bird’s nest       |     35%      |                      
|

  |—————————–|————–|                      
|

  |Aerated waters, fruit drinks,|              |                      
|

  |fruit syrups, fruit juice    |     25%      |                      
|

  |—————————–|————–|                      
|

  | Monosodium glutamate,       |              |                      
|

  | essence of soy              |    
25%      |                      
|

  |—————————–|————–|                      
|

  | Milk powder, condensed milk,|              |                      
|

  | Evaporated milk             |     10%      |                      
|

  |—————————–|————–|                      
|

  | Fresh cow’s milk,           |              |                      
|

  | fresh ewe’s milk            |    2.5%      |                      
|

  |—————————–|————–|                      
|

  | Canned foods                |    
10%      |                      
|

  |—————————–|————–|                      
|

  | Egg products                |    
10%      |                      
|

  |—————————–|————–|                      
|

  | Cotton yarn:                |yarn number
30|  An enterprise shall  |

  |  Natural colour cotton yarn | and upwards: |  be subject to tax for|

  |  Lint-free cotton yarn      |    26%      
|  yarn produced by     |

  |  Staple rayon yarn          | less than 30:| itself and
used in its|

  |                            
|     23%      |  production, at the   |

  |—————————–|————–|  prescribed tax rate. |

  | Cotton cloth:               |      &n