Studies On The Effect Of "Two Taxes Merge Into One Tax" Policy Taking In Using Foreign Capital Of The Agriculture Product Processing Industry

At present, the income tax of domestic and foreign companies belongs to two different laws, one is "The regulation of income tax of foreign investment and foreign company of the People' Republic of China", the other one is "The regulation of income tax of company of the People' Republic of China", these two regulation have been executed more than 20 years up to now. With the development of policy of opening and reforming and the entrance of WTO, and with higher levels of marketing and internationalizing of Chinese economy, however, the shortcoming of these two regulations is becoming more obvious. The combination of these two regulations into one law was requested urgently from 2003, moreover, this combination tax will be executed in 2008, some experts expected. The application of this combination tax will justify the present income tax policy to foreign company and then create an equal, fair income tax environment to both domestic and foreign companies. But this new tax policy will quit the current lower rate of income tax for foreign companies.However, one of the major capital investments in the industry of processing of agriculture products is from foreigners, the application of this combination policy will prevent the foreign investment in this area, and even causes the escape of foreign investment from the processing of agriculture products, worried by some departments of government and related experts.The present study will focus on this special policy and area, and compare this combination income tax policy to the counterpart of other countries, try to search the effects of this combination policy on the foreign investment on the industry of agricultural products processing, moreover, we will study the complementary ways to reduce the negative effects of the combination tax on this area.The study includes following items: 1) Comparion of the current policy of income tax and the new one. Firstly, we reviewed the international policy on the income tax of company, and then analyze the difference and problems of our current policy on this area. In addition, we studied the pressure and requirement on the application of the combination policy; Effects on the foreign capital investment environment on the processing of agricultural products; 2) Application of our theory. Based on the theoretical analysis, we invested the effects of application of combination income tax policy on the capital investment on the agricultural products processing industry by analyzing the purpose, methods, strategy and the income tax policies between China and other countries. Our result shows that there is no negative effects of application combination income tax policy on the processing industry of agricultural products; 3) Complementary ways to reduce the negative effects of the combination tax on this area.Summary. There is no negative effect of application combination income tax policy on the foreign investment in agricultural products processing industry. On the contrary, the future is bright of foreign investment on this area with the entrance of WTO and the self-improving of the combination income tax policy.