Research On Optimization Of Corporate Income Tax Incentive Mechanism To International Direct Investment

With the growing process of globalization, the scope of international direct investment extended increasingly, and became the most important carrier of international economy exceeding international trade. The sustaining growth of international direct investment is due to the political measures in home and host countries. Every country uses corporate income tax incentives as important instruments to attract FDI encourage ODI. Many scholars have analyzed the effect of tax incentives from theoretical and empirical point; they haven't gotten the conclusion that tax incentives have important influence on international direct investment. However, it is an unarguable fact that in practice host countries are using tax incentives to attract FDI and home countries are using tax incentives to encourage investing abroad.From the point of international direct investment, there is a demand of tax incentives, which is one of the factors affecting the activity of investment. From the point of governments, there is a supply of tax incentives. For the purpose of correcting market failure, promoting infant industry and regional development, governments incorporate tax incentives into comprehensive strategy to encourage investors. How to realize game equilibrium is the main subject of theoretical analysis in this dissertation. Since reform and opening-up, we had great performance in using foreign investment. The role of corporate income tax incentives can't be ignored. With the development of social economy and improvement of investment climate, the accumulative foreign investment is growing increasingly, as well as the trend of direct investment abroad is enhancing. The main subject of empirical analysis in the dissertation is how to perform the strategy of"introducing inside and going outside"through the optimization of tax incentives, which will enhance the quality of FDI and promote national enterprises invest abroad.There are 7 chapters in the dissertation. Besides introduction, it is composed of three parts: theoretical research(chapter 2 to 4), practical examination (chapter 5, 6) and political suggestion (chapter 7). From the point of both investors and governments, Chapter 2 and 3 analyze the demand and supply of international direct investment tax incentives. Chapter 4 is the game equilibrium analysis on the supply and demand of tax incentives. Chapter 5 and 6 are practical examination and discussion of international direct investment tax incentives in foreign countries and China. Chapter 7 gives suggestion about optimizing tax system and administration of international direct investment tax incentives in China. The detailed structure is as following:Chapter 1 is an introduction. It presents the background and significance of the subject in the dissertation, clarifies and defines some relative glossaries, gives a synoptic review of foreign and Chinese scholars, introduces theoretical tool and research method, concludes basic ideas and logical structures, points out the innovation and weakness of the dissertation.Chapter 2 discusses the demand of corporate income tax incentives from the point of international direct investment. This chapter analyzes the necessity of corporate income tax incentives from the angle of international direct investment and explores the effect of tax incentives on managing decision of multinational corporation. Based on the introducing of growth in international direct investment, the chapter analyzes the factors affecting international direct investment and identifies the position of tax policy in investment climate of host countries and home countries. Using neoclassical investment model, model of standard capital cost theory, the chapter analyzes the general effect of tax on investment and systemically analyzes the influence of income tax incentives in both host and home countries on multinational corporation's investment. Based on comprehensive theoretical analysis, the chapter employs extended decision tree for foreign investment to research the effect of corporate income tax incentives on various international direct investment decision of multinational corporation, such as the region of investment, the extent and level of investment, the industry of investment, the form of enterprise, and the method of financing.Chapter 3 analyses the supply of corporate income tax incentives from the points of host and home governments. This chapter analyzes the necessity of corporate income tax incentives from the angle of host and home countries and explores some issues in supplying tax incentives by governments. The first section explain the reason of host and home governments supplying tax incentives to international direct investment, which concerning why encouraging international direct investment and why introducing tax incentives to encourage international direct investment. The second section is the cost and benefit analyze of corporate income tax incentives, which focusing on the direct and indirect cost of tax incentives. The third section is the equilibrium analyzes on equity and efficiency. The governments should consider equity and efficiency comprehensively, and make proper tax incentive policy. The purpose of the policy should be enhancing economic efficiency while keeping considerable equity.Chapter 4 is the game equilibrium analysis on the supply and demand of corporate income tax incentives. For international investors, the more tax incentives they've gotten the better, under the circumstance of keeping other investment climates no change. For governments, the less tax incentives they provided the better, under the circumstance of keeping other investment climates and the flow of international direct investment no change. Therefore, the eventual decision of tax incentives is the results of game equilibrium with various players. The subjects of this chapter are to analyses the game equilibrium of corporate income tax incentives among various players, which including four levels analysis. The first level analyses the action choice of international direct investors and host countries. Aiming at optimal design of tax incentives policy in host countries, this part establishes game equilibrium model to discuss general equilibrium and its policy implication. The second level analyzes the game equilibrium between two host countries and its policy implication. It is suggested that a country can reduce FDI tax incentives, if the country own obvious advantages in market size and labor cost that its neighbors. The third level analyzes the game equilibrium of supplying tax incentives between local governments within a host country. It is indicated that local governments should attach most importance to national benefits; guided by the regional and industrial development policy of the country, strengthen cooperation and coordination of FDI tax incentives, avoid unnecessary competition in tax incentives and efficiency loss. The forth level frames a game model to study the effect of tax incentives in home country on the benefit of the enterprise investing abroad and net national welfare. It is concluded that no matter from the micro or macro level, the developing home countries should provide tax incentives to their resident enterprises investing abroad, which would bring win-win result to both countries and enterprises.Chapter 5 reviews the international experience in corporate income tax incentives. From the angle of host and home countries, the chapter discusses the tax incentives of FDI and ODI, as well as its optimizing experience, which would give some reference to the optimization of tax incentives in China. The first part concludes the international experience of FDI corporate income tax incentives optimization from the following three perspectives: developed countries, developing countries, and representative case in Korea. The second part concludes the international experience of ODI corporate income tax incentives optimization from the following three perspectives: developed countries, developing countries, and representative case in Japan. The third part is the conclusion of foreign experience in corporate income tax incentives.Chapter 6 is an empirical analysis of international direct investment corporate income tax incentives in China. The chapter elaborates on the status quo and problems in our corporate income tax incentives, which would provide practical reference to further optimization. The first part summarizes the developing process of international direct investment in the angle of attracting FDI and encouraging ODI, analyses the fundamental changes in the strategy of opening up recently in our country. The second part analyzes the corporate income tax incentives to FDI, and explores the scale and structural effect of new tax incentives on FDI after enforcing the amended enterprise income tax law. The third part analyzes the corporate income tax incentives to ODI, and discusses the actuality and problems of ODI tax incentives.Chapter 7 provides the suggestion about optimizing corporate income tax incentives to international direct investment. Based on the theory of international direct investment tax incentives in chapter 2, 3 and 4, using foreign practice in chapter 5 for reference, aiming at the current problem in China discussed in chapter 6, the chapter suggests countermeasures of optimizing corporate income tax incentives to international direct investment in China. The first part sets forth the basic requirements about optimization. From the point of host country, the second part discusses the detailed strategy on further optimizing corporate income tax incentives to FDI. From the point of home country, the third part discusses the detailed strategy on further optimizing corporate income tax incentives to ODI.