An Analysis To The Relationship Of The Corporation's Charitable Giving And Tax Policy In China

A lot of researches had discovered that the corporation's charitable giving has a close relationship with tax policy. But when we consider this problem in different countries, there are different legal systems of tax revenue in different country and the corporation's action may become quit different and this leads to the result that the tax policy has a distinct different influence between countries. In this research, we try to set up a model of relationship between the corporation's charitable giving and tax policy in China.As one of the emerging market economics, the company in China is quit different compared with other countries. In the paper, we focus to the problem of sensitive of the Chinese corporation to the change of tax policy. Corporate charitable giving can be both looked as expenditure (consume) and a kind of demand. The tax price of corporation's charitable giving is been defined as the amount of payment when corporate donates one yuan and if the corporation's income tax rate is t, it equals 1—μ*t(hereμrepresents the deductible rate).In China, there are many preferential policies in the income tax law of corporation, the actual tax rate is quite different from nominal tax rate so we should use the expression of tax price=1-μ*the actual income tax rate of corporation,where the actual income tax rate equals the income tax divides the profit of corporation. We use the declared information in tax department which include index of the sales income,total profit, assets, liabilities, charitable giving of 828 corporate and the time period is from 2003 to 2009. Through the compare of different regression model, we choose the best that coincide with the data. To show clearly the difference in different corporation's action, we also use the reasonably complete data of 39 corporations and use fix effect model to deal with this problem. The result of different data simulation had been compared accordingly.The corporate charitable giving has some relationship to tax policy in China, but comparing with advanced countries, it is relatively lower. The tax policy should give more incentive to the corporate charitable giving in China for two reasons:Firstly, China was vast in territory and it's social and economic development is quit unbalanced in different areas and the government can not solve all the problem of the society, the corporation can deal with their familiar area to save social cost and to get efficient disposal of resources. Secondly, the corporation's ability is quiet limited in China and their charitable activities should be encouraged by policy support. From the government point of view, we should also pointed out that the tax preferential policy should be regulated to avoid of the use of the preferential item for the evasion of tax by some companies.