Research On Capital Income Taxation Under Tax Competition In Open Economy

In open economy, the policy decision of any country can not be isolated to the entire world economic development. The inflows and outflows of foreign investment capital would affect the government taxation policy. This dissertation studies capital income taxation under international tax competition with the consideration of actual capital income taxation system. Based on the expansion of standard tax competition model, optimal income taxation policy of foreign direct investment and foreign portfolio investment is analyzed. Empirical study is also carried on by using econometric method. The conclusions from such studies promulgate characteristics of international capital taxation development and have deepened tax competition theory research.First, this dissertation discusses the standard tax competition model and the corresponding expansion. By analyzing relative taxes of multinationals investment in resident country and host country, a new tax competition model is built by adding an important factor: multinational corporations. Classic theory of international tax competition claims that it is better to give up capital income tax for a small open economy. However, different ways of avoiding international double taxation can create profit differences of multinational corporations, which can influence tax revenues of both host country and resident country, and forms different government revenue functions. This dissertation obtains optimal taxation policy of capital income for small open economy and large economy by solving equilibrium tax rates. The conclusions prove that under the existing international tax agreement pattern, the optimal policy for most countries is to collect capital income tax at source.Second, the empirical analysis measures corporate income tax burden, which is the main tax burden of capital in multinational corporations. With the calculation of the indexes of corporate income tax burden in the selected 19 countries, this dissertation compares the global average effective tax rates across countries and over period for 40 years. Meanwhile, econometric methodology of time series is utilized to do further inference statistics analysis. The conclusions express the tendency and characteristics of the world corporation income tax burden in globalization economy.Third, this dissertation studies financial capital income taxation of multinational corporations in host countries and resident countries. The open economy environment brings frequent flow of financial capital, which provides plenty of tax evasion opportunities for financial capital such as interest and dividend. Facing this challenge, governments in various countries can solve this problem through raising tax rate of withholding tax or strengthening tax information exchange. This dissertation discusses the economic influences of the two methods individually, and claims that to promote information exchange is a better choice. Through the establishment and solution of equilibrium model, this dissertation gets the conclusion that small countries would be attracted to participate in tax information exchange system by introducing tax revenue sharing mechanism. And this is helpful to promote the establishment of international tax information exchange system.Finally, the previous theoretical models and conclusions are used to analyze capital income tax system in China. Based on the theoretical and empirical analyses, this dissertation concludes reasonable suggestions to Chinese capital income taxation reform in open economy's tax competition.