Economic Analysis Of Taxation Of Foreign Direct Investment

Today, as globalization has become an important feature of world economy, one single country's taxation policy is becoming more and more internationalized as a result of the transnational flow of production elements, especially capital , facilitated by the globalization of world economy. The globalization is posing a challenge to the traditional self-seclusion-styled taxation mechanism of one country. In a closed economy, the production elements are limited within the country, all the companies'and most individuals'producing and managerial operations are domestic, therefore one country may tax all the income and activities that come from it in the light of the territorial jurisdiction, and may not have conflict with the taxation authorities of other countries. The implementation of one country's tax policy can absolutely stand away from the impact of other countries. A country's taxation system is rarely interactive with another country's. But in open economy, the release of control of foreign exchange and capital, the internationalization (integration) of capital market enable the capital's free flow in and out a certain country, this means the taxation policy of capital import country A may seem very special to capital export country B's, and makes the taxation system that is simply based on territorial jurisdiction infeasible. While making a specific taxation policy, all the countries must refer to both territorial jurisdiction and global jurisdiction or more jurisdictions (with the exception of few countries). At present most countries in the world are carrying out residence jurisdiction and source jurisdiction on multinational capitals, these parallel tax jurisdictions may cause repeated taxation on foreign...