| From the last of 50 years, economy globalization, as the trend of era, has produced great and far-reaching impact on the development of international economy & government relationship. Economy globalization signs that the basic trend for the development of the modern global economy, and the global capital flow is the central embodiment of this trend.Conforming to the trend, the Chinese government has taken the basic policy of the reform & open door. For the sake of very weaken economy background and limited funds for infrastructure in China at that time, aim at solving the problem of scarcity of investment, rapid economic development by using the foreign capital has become necessary choice for the Chinese government.After more than two decades development, we have achieved great success in using the foreign capital, the FDI (Foreign Direct Investment) has attained large scale, and it has played holding the balance role in the China economy, therefore being the important sustaining factor for prompting the rapid development and reform & open door policy. However FDI has also produced side effect in the national economy.There are many respects bringing this side effect, not only the essentiality of capital chasing the profit, but also the faultiness of the foreign capital policy of China, among them, it is an important factor of tax policy for encouraging and leading the foreign investment.After China carried out the reform & open door policy, it has been given lots of tax beneficial policies of the foreign investment in China in order to attract the foreign capital and introduce into the advanced technology & the management experience, these policies are unprecedented for the wide range and much beneficiary for the foreign investment. It is formed for the basic situation of China, the need for serving the reform & open door policy, and developing the tactic pattern fitting with the open door policy. With the rapid development of economy and deepening of reform, it has taken great place in the domestic and international environment supporting the tax beneficial policies, and these extensive and exceeding the country treatment polices have produced many side effects in the practice. It has produced great impact on the national industry, not only effecting the fair and efficient competition of the domestic and foreign enterprises, but also reducing a large amount of tax revenue. Esp. with China entry toWTO, the great reduce in the tariff of China, boarding the limitation in market admittance for foreign investors, and increasing in foreign investment, it is more serious for the side effects. It is urgent affairs to reform the tax beneficial policy for current foreign investment, justify the tax burden for the domestic and foreign enterprises, and establish the fair, high efficient, equal tax beneficial policies system in order to let the domestic and foreign enterprises comfortable.In the paper, from the start and respect of improving the equality and efficiency of foreign investment, focus on the tax beneficial policy for the foreign investment, and using the method of reviewing the history, analyzing the current situation, demonstrating the related theories etc.In this way, the success & failure of the tax beneficial policy for foreign investment in China will be discussed, as well as the factors affecting these policies, furthermore, related suggestion on reforming the current tax beneficial policy and countermeasures will be given.The first part of this paper analyzes the relationship between FDI and economic development of our country comprehensively, and studies the important roles of FDI, especially points out the effects in stimulating employment and upgrade of industries. As any thing has positive and negative effects, while FDI comes into force, it has some negative impacts on the economic development, especially the small enterprises. Therefore, all of these supply the reformation of taxation policy with the direction.Then this paper looks through the enactment of taxation polic...
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