The Effect Of Enterprise Tax On FDI Inflow Under International Tax Competition And Coordination

Under the trend of globalization, the reallocation of sources is no longer limited to a country or a region. The liquidity of international capital improves significantly, so that the competitions for the international capital are increasingly furious. Meanwhile, owning to the development of international trade, the economics in the worldwide are connected more and more tightly. The capital flow in the world wide is influenced by the factors, such as the resources, labor cost, technology and market, among which, the tax policy plays an important role. Moreover, compared with other factors, the governments can leverage the tax incentives to attract investments more actively. The tax rates of the countries and regions around China decreased with the trend of global tax competition, which involves China into the international tax competition and coordination to a more intensive extent. Under the circumstance of the relaxation of capital control and the consolidation of the two separate income tax regimes in China, the problem is increasingly important and meaningful, that how to position the competitiveness of the income tax for enterprises to attract capital flows and make the reasonable tactics to balance the strategies in international tax competition and coordination. Therefore, this paper combines the empirical and normative methods, to analyze the welfare effect of tax competition and illustrate the function of tax coordination qualitatively and quantitatively based on the theory of international economy, public finance and international tax. Then some policy proposals are given on the relative topics under the consideration that the current FDI policies meet some reforms in China as well as the countries and regions around.