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Regulation Of Harmful International Tax Competition

Posted on:2008-05-25Degree:DoctorType:Dissertation
Country:ChinaCandidate:R H ChenFull Text:PDF
GTID:1116360212987366Subject:International Economic Law
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Accompanying the deepening of economic globalization, many countries, in order to attract capital, adopt competitive tax policy one after another. The worldwide phenomenon of tax cutting, zero tax and preferential tax treatment is called international tax competition. Worrying about this phenomenon and its possible result, many countries from EU claimed that, some international tax competition are of low-efficiency and harmful, that harmful tax measures inflict damages to other countries. In 1997, the European Union launched an activity combating harmful tax measures within EU, 1998 saw a similar activity initiated by the Organization of Economic Cooperation and Development ("OECD"). Targeting at harmful taxation measures, both activities clearly specify the criteria of harmful taxation measures and request the countries involved to eliminate such measures. Under such circumstances, China has to take into account the international move while choosing its tax policy to attract foreign capital. To provide legal advice to China's policy makers, it is therefore necessary to research into EU and OECD activities. This explains the motive of this dissertation.The dissertation consists of four chapters. Chapter one"General introduction"explains the background, mechanism and evidence of international tax competition. With the deepening of economic globalization, international tax competition arises with tax jurisdictions competitively adopting low level or even zero taxation or preferential tax policy to attract fluid factors in the economic world. The phenomenon of international tax competition is indispensable with three conditions, i.e., economic globalization, economic competition among countries and the enterprises'chase after profit. As a result of such competition, tax revenue source and tax base of some countries are negatively influenced. Many EU countries adopting high-tax-high-welfare policy launched activities combating harmful international tax competition. Such activities target directly at tax policy of tax jurisdictions, relevant tax jurisdictions are demanded to eliminate the so-called harmful tax measures.Chapter two"multi-lateral activities regulating international tax competition"introduces the background, process and result of OECD and EU activities. In 1998, OECD for the first time claimed that some tax competition measures are harmful. In its initiative OECD clearly instructed how to identify harmful tax competition. OECD demands tax haven and tax jurisdictions with harmful preferential tax measures to abandon harmful tax policies by the given deadline. OECD threatens those non-obedient jurisdictions with unified resistance measures. After 1998, OECD conducted a tax policy review and publicized the name list of tax havens and jurisdictions with harmful preferential tax measures. However the OECD initiative was resisted by many tax jurisdictions. Finally the movement decayed with no jurisdictions being actually punished. Almost at the same time, EU launched an activity within EU countries combating harmful tax measures. In 1997, EU issued a Code of Conduct for Business Taxation. Based on the Code, EU reviewed the tax policies of its member states and that of its dependent or associated territories as well. The investigation finally identifies as harmful 66 tax measures covering intra group services, financial services and off-shore companies, etc. However, given the fact that OECD move has encountered failure in the international community, EU realized that continuing with this activity will definitely abate EU's attraction for capital and other fluid factors, EU finally ended up its activity.The article firstly tries to find out if it is justified to regulate international tax competition. The author holds that international tax competition leads to conflict of interests between countries which as labeled by Isaiah Berlin as conflict between good and good. However, in a real world where many individuals or units exist, justice rather than good is the most important and fundamental value because justice implies order and reasonableness. Justice has priority over freedom. Some of the international tax competition practices cause the huge reduction in tax source and tax base of other countries. Such practices also negatively affected the tax fairness and tax efficiency in other countries. International conflict thus arises and the international justice is harmed. Therefore it is necessary to regulate harmful international tax competition. Then the author proposes the ideal legal framework regulating international tax competition. Those to be regulated are mean tax measures which have unneglectable effect on other countries. Tax jurisdictions with harmful tax competition practices shall correct their tax regime and remove the harmful characteristics. Basing on the global justice theory, the author holds that some special arrangement shall be made for the developing countries and those least developed small tax jurisdictions. The international world shall help these countries establish their economy pillar industries. The article also reviewed OECD and EU regulation framework by pointing out their significance and their failor to embody global justice.Based on this framework the author judges the OECD framework and holds that OECD activity violates prevailing international law and infringes the sovereignty of many other countries. Additionally, the author concludes that, OECD, by adopting unified rules to all the countries without considering their differences, is behaving against international justice and might increase the number and frequency of disputes between countries. The EU case is somewhat different. Solidly based on international law and taking into account the differences between countries, the EU framework comes more in compliance with international justice logos. The shortcoming of EU framework is that it might result in too many disputes among countries.Chapter four analyzes the impact of international tax competition regulation on China. Firstly, how to make China's tax policies attractive on one hand and less risky on the other in light of harmful tax competition regulation. Secondly, How to avoid the damages sustained as the result of other countries'tax policy. Thirdly, what standpoint shall China take toward OECD framework in international tax dialogue. The author holds that China, while making its tax policy, shall take into account the possible influence of the policy on other countries. In international taxation dialogue, China may objectively analyze and criticize OECD activity basing on international law and international justice theory. Currently it is not necessary to initiate the regulation of international tax competition within the neighboring region.
Keywords/Search Tags:International tax competition, regulate, sovereignty, OECD, EU, international justice, unification of two taxation systems
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