Sinopec Shanghai downgrades 1Q earnings on tax hike

Sinopec Shanghai Petrochemical said Sunday it would revise its already-published first-quarter earnings downwards by more than 20% because of higher corporate income taxes, China Economy reported. The move comes after the Shanghai tax bureau notified the company that its income tax rate had been raised from 15% to 33% from this year, shaving US$30.03 million (RMB227 million) from the company’s reported first-quarter net income of US$142.86 million (RMB1.08 billion), the company said in a statement to the Shanghai Stock Exchange. The company, a leading domestic ethylene producer and a subsidiary of top Asian oil refiner Sinopec, is expected to give its half-year figures on August 27. Sinopec Shanghai’s shares gained 1.44% to RMB13.38 (US$1.77) in Shanghai Friday ahead of the announcement but slid 5.48% to HK$3.97 (US$0.52) in Hong Kong. The original 15% preferential income tax rate was granted in 1993 by the State Council to nine companies, including Sinopec Shanghai, Tsingtao Brewery, Yizheng Chemical Fiber, and Tianjin Capital Environmental Protection, as part of a concession encouraging mainland-listed companies to go public in Hong Kong. The State Administration of Taxation said in June that the concession had been in place too long and should be immediately scrapped. Domestic firms in China are typically levied a normal income tax rate of 33% compared to foreign companies’ 15%, but the government is planning to unify income taxes at 25%. It will retain some tax allowances, such as those offered to hi-tech companies working on environmentally-friendly and energy-efficient technologies.