The Two Laws, The Merger "after Domestic Foreign-funded Tax Equity And Countermeasures

Before the year of 2008, the domestic and foreign-funded enterprises in our country apply to "Provisional Regulations on Enterprise Income Tax" and "Foreign-invested Enterprises and Foreign Enterprises Income Tax Law" separately. In order to attract foreign investment to develop the economy, our government given the plethora of preferential tax policies for foreign-funded enterprises, making the tax burden of domestic-funded enterprises higher than foreign-funded enterprises. There are significant differences between the two original income tax law applied to domestic and foreign enterprise separately, Development Zones all over the country introduced various tax concessions to attract foreign investment and set up factories, as well as the foreign-funded enterprises through transfer pricing to evade taxes, were to some extent mitigated the tax burdens of foreign-funded enterprises. This unfair tax policy weakened the competitiveness of domestic enterprises, made them in the negative position of the competition; As carried out a large amount of foreign tax incentives, it reducing our country's tax revenue, so that foreign companies are able to come up with more funds for product development, to retain capable people, to seize market share, and then to crowd out domestic-funded enterprises; At the same time, domestic enterprises, driven by the benefits would tend to put the funds transferred abroad, then re-investment to our country, in order to enjoy the tax incentives, which exacerbated the transitional capital flight.January 1, 2008, the new "Enterprise Income Tax Law" was brought into effect, the original "Provisional Regulations on Enterprise Income Tax" and "Foreign-invested Enterprises and Foreign Enterprises Income Tax Law," abolished at the same time. The new "Enterprise Income Tax Law," unified the main body, tax rate, preferential tax policies and the pre-tax deductions and standards, realized the horizontal fairness between the domestic and foreign enterprises on income tax policy. However, except tax policy, there is still a lot of factors can influent the tax fairness between domestic and foreign-funded enterprises. Be influenced by the operational capacity of tax officials and business management methods in different areas, there are some differences with how to understand and execute the new income tax law, it affected the fairness of tax indirectly, at the same time, the implementation of the new income tax law, made the original tax policy for foreign enterprises invalid in various regions, and the further introduction of a new form of tax competition as well as the new law which give five-year transition period to foreign enterprises also affected the domestic and foreign tax equity substantially.The tax unfair between domestic and foreign enterprises is contrary to the principle of tax fairness and the principle of national treatment, it is necessary to further improve the tax system, fair tax burden for domestic and foreign-funded enterprises with the same tax treatment. In order to balance the tax burden of domestic and foreign-funded enterprises, it is necessary to further improve the income tax policy, to formulate a unified management approach, to maintain the stability of the policy, to prohibit arbitrary introduction of special provisions, and to reach the consistent of policy implementation standards; In addition to the new enterprise income tax law, we have to improve the industry-oriented policies to encourage the upgrading of industrial structure; Standardize tax competition between local governments, deepen the reform of the taxation system, strengthen the legal system, formulate an adequate industrial policy in line with the comparative advantage in this region, get rid of the means of simply rely on a variety of tax incentives to attract foreign investment, shape the region's core competitiveness, and narrow regional economic development gap; Strengthen the construction of procedural law, improve the procedural law of enforcement process, legal protection, and enforcement oversight ; Strengthen international tax cooperation, international tax intelligence exchange and information exchange, further improve the product price information database, and severely punish those foreign-funded enterprises who want to evade taxes.