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PERU IMPLEMENTS TAX REVISIONS

LIMA - Peru's executive branch modified income tax rules for small businesses as part of a series of tax reform measures, according to the Dow Jones Newswire.
 
The executive branch was granted legislative powers to reform the tax system by decree in September.
 
Currently some 140,000 small businesses in the industrial sector that earn less than $5700 a month fall under a "special income tax bracket."

The bracket was created to encourage small business to join the formal sector. As of January 1, service providers will also be eligible.

Among other things, the measure seeks to clamp down on tax evasion. To be eligible businesses can only have eight employees, must be under a certain size and can only have one branch office, among other stipulations.

The government's tax reform package also includes removing tax exemptions and correcting distortions in the income tax system.

One of the most controversial aspects, however, is a proposed tax on banking transactions.
Labor Minister Jesus Alvarado was quoted as saying that the cabinet will likely debate the measure in the near future. 

The government wants to increase use of the banking sector to bring more people into the so-called formal economy. Among other things, the measure will give tax authorities more information on money laundering, fraud and tax evasion.

Banking sector officials have warned that applying the tax could in fact push people away from the formal banking sector.
 
Finance Minister Jaime Quijandria has said earlier the tax will be for a three-year period, although he hasn't given an exact rate that will be applied to the banking transactions.
 
CHINA RESPONDS TO US TRADE CHARGES

BEIJING - China has defended itself against US criticism it had failed to live up to its World Trade Organization (WTO) commitments, saying American lawmakers should recognize the efforts it has made.
 
The reaction by Beijing came as the US House of Representatives overwhelmingly approved a resolution recently accusing China of shirking the commitments it made to open its markets when it joined the WTO in 2001.
 
Chinese Foreign Ministry spokeswoman Zhang Qiyue told Reuters that China rejected the criticism, saying the country had amended or abolished about 3,000 laws and regulations which failed to conform with WTO rules.
 
"We hope the US Congress can take notice of and recognize the efforts made by China," she told a news conference.
 
"China is conscientious and serious about observing its WTO obligations" in terms of legislation, law enforcement or administrative measures, Zhang said.

She urged Congress "do more things which are conducive to further development of a constructive and cooperative China-US relationship."

But Zhang did not address the issue of China's fixed exchange rate, which has become the focal point of growing friction between the two Pacific giants.
 
The non-binding resolution passed by the US Congress increases pressure on President Bush's administration to show progress in reversing the US trade deficit with China, which hit a record $103 billion in 2002 and is forecast to exceed $120 billion this year.
 
According to Reuters, US manufacturers complain that Beijing's practice of pegging the yuan to 8.28 to the dollar gives it a huge trade advantage by artificially depressing the price of its exports. But China has resisted any swift move toward floating its currency because of the risk to its banking system.

US congressmen blame the trade gap, and China's fixed exchange rate, for a large portion of the 2.7 million US manufacturing jobs lost over the past two years.
 
In a move aimed at narrowing the trade gap, Chinese officials told US Commerce Secretary Don Evans in Beijing recently that it would send a government delegation to the United States on a mission to buy US goods.

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