Tax Incentives For FDI And Policy Recommendations

The purposes of this study are to investigate the influence on Foreign direct investment(FDI) with the practice of the incentive taxation policies(ITPs) on foreign investors, which began in 1979, and their contemporary significance and value. Along with the implementation of the policies, beginning since the reform and opening up, and economic in-depth development, the FDI inflows in China grew with each passing day. Did the increase of the FDI inflow only attribute to ITPs? Or could ITPs effectively stimulate FDI inflow?This study discovers an economic phenomenon that the scopes and external effects of FDI inflow differ with the purposes of the investors, through the investigation towards the causes of FDI inflow. Especially, we through further studying and empirical analysis of different developing stages of FDI, discovers that ITPs seems affective but lacks real worth. More precisely, the effect of ITPs appeared important only in their early stages but weakened with the mature and stabilization of China's domestic political and economical environment, improvement of financial markets and rapid economic development, which led us to think deeply that whether should ITPs be replaced by the unified taxation policies(UTPs).Through analysis, we have come to the conclusion that today ,with China's political and economic stabilization and industrial standardization, it is necessary to carry out UTPs after termination of ITPs, which is conducive not only to China's economic development and arrangement, but to the fair competition between domestic and foreign enterprises, in line with the WTO principle of national treatment.