The Research On Chinese Tax Policy For FDI Under International Tax Competition

Because FDI is significant to the development of a country's economy, all countries, especially developing countries, generally utilize tax differences, namely formulate tax preference policy to attract FDI. However, in view of the externality of tax preference policy for FDI and sorts of influence brought by international tax competition, one country should not only base on it's own interest while making tax policy for FDI, but also consider tax policy and possible responses of other countries(such as surrounding countries and home country), so that it can realize common benefit instead of loss with each other.This text, using theories of international investment and tax, mainly relies on normative study and analyses from 4 aspects. Section I, starting with the general theoretic analysis of motives of FDI, have probed into the relation between tax and FDI. As one of the factors, tax is playing an important instead of determinant function in a FDI decision. It is essential that developing countries attract FDI through rational and appropriate tax preference policy. But they should make concrete analysis on the effect of tax preference and consider its "invalidity" and "unnecessity" as well. Section II, discussing on the problem of international tax competition caused by FDI, have pointed out with combination of theories and practice that international tax competition , if not well coordinated , will offset the appeal of tax preference for FDI to some extent and reduce the validity of the policy. As Followed, Section III have specifically analysed and dialectically appraised Chinese current tax policy for FDI. Lastly, Section IV have raised corresponding suggestion aiming at how to perfect the policy under international tax competition.The innovative points lies in: (1)Study the correlation between tax and FDI from a new visual angle and analyse the external function mechanism of tax to FDI under fully consideration of international tax competition; (2)Analyse with the basic principles of Game Theory and explain that what impacts international tax competition will produce on validity of one country's tax policy for FDI and that why it need incline to coordination; (3)Adopt the analytical method of "from abstract to concrete", combine theoretical achievements of West and practical conditions of China, link with the international trend and answer the question of reservation or abolition of Chinese tax preference policy for FDI.