Study On Our Country's Tax Sparing Credit System

In order to develop economics, the developing countries usually set up a series of policy of tax reduction and exemption to make up for the insufficient environment and attract foreign investment. In the circumstance of credit law having been established by capital exporting countries, if there is no tax sparing to cooperate with, the tax cost paid by the host country will always be invalid. Over a long time, the developing countries tended to ask for a treatment of tax sparing by the developed countries, most of the developed countries regard tax sparing as means of foreign aids offering the developing countries the treatment of tax sparing, but the U.S. hasn't given any countries the treatment of tax sparing particularly. However, with the announcement of the research report about the reassessment of tax sparing by the OECD countries in 1998, it is predicted that the developed countries have changed their attitude towards tax sparing gradually, keeping close to the US. As one of the developing countries appealing the most investment over the world, China is asking the developed countries for the tax sparing to guarantee the implementation of our preferential policy of concerning foreign tax. In the settings of the developed countries transforming common support into recent query and anxiety towards tax sparing as well as our great adjustment of preferential policy of concerning foreign tax before long, it proves urgent to have an investigation into the system of tax sparing. This article based on the description of the existing research and the introduction of tax sparing elementary theory divides following four parts to conduct the research.Firstly, summarising several kinds of international attitudes to tax sparing and analyzing its behind reasons.Secondly, putting tax sparing into a two period equity model as a variable proves from theory that tax sparing can promote FDI investment and encourage investors to flow together aftertax profit as well. Then, the article analysed several kinds of condition of abused tax sparing with emphasis. Thirdly, this article analyzed the actual utility of tax sparing and credit in concrete terms. It is considered that tax sparing can be used to be beneficial supplement of preferential policy of concerning foreign tax, but its function hasn't reached the degree that our preferential policy of concerning foreign tax will lose efficiency without it. the author acquire strong proof that the tax sparing rendered by our country will promote our capital to go out from object demonstration.Finally, the author made some suggest ion of policy how we should improve the system of tax sparing and credit.it is expected that they could contribute to the negotiating about the tax sparing agreement in the future...