Resist Harmful Tax Competition Practice Law

Undoubtedly, economic globalization is one of the most significant characters of modern times. The capital flows of transnational improve the resources better used and allocated, which enhances the living standard of people. At the same time, economic globalization increases the possibility of a country tax policy making an effect on the other countries. When a government supplies foreign investors with a more favorite tax policy, the other governments usually follow under the great pressure of the development of national economy. The countries offer more favorite tax policies competitively, which forms over competition on tax what we called harmful tax competition. Harmful tax competition results in the necessity of coordination in international community. however, nowadays the most feasible way is to make regulations against international tax avoidance operated by multinational enterprises on the basis of the respect of national sovereignty. This thesis is composed of introduction, text and epilogue, including: Chapter one defines harmful tax competition and discusses the harmful results of harmful tax competition. This chapter also analyzes the necessity of counteracting harmful tax competition from both the views of developed and developing countries. Chapter two analyzes harmful tax competition practices. Harmful tax competition practices include two forms, which are tax haven and harmful preferential tax regimes. The determination standard and the way of utilization are stated mainly. Chapter three discusses the legal measures of counteracting harmful tax competition practices. Unilateral legal measures appear mainly as transfer pricing tax rules and controlled foreign company legislation. Bilateral legal measures include exchange of tax information and prevention of tax treaty shopping. Multilateral legal measures are multinational cooperation in tax matters. Chapter four, on one side, discusses the insufficiency of current legal measures and the suggestions of perfection with the analysis of the negative influence of harmful tax competition practices on China; on the other hand, rethinks of Chinese current preferential tax regimes and founds out many relevant defects as well as put forward several improving suggestions after stating negative influence.