China Foreign Enterprise Income Tax Effectiveness

China has been implementing a dual trade tax system for corporate income, which had strongly boosted the inward FDI in the early period of China's reform. With development of society and economy, the effects of the dual track tax become uncertain. After reviewing the evolution of FDI and income tax in China, via introducing dummy variable of tax, using serial data (1997-2003) of 18 cities, the author checks the validity of China's corporate income tax in stimulating FDI. The regression results show that, with similar conditions, Special Economic Zones in China with the lowest tax rate and greatest tax incentives attract more FDI than those with moderate tax rates and tax incentives, which indicates that tax incentive policy is also important factor for foreign direct investment. At last, based on analyse of the paper, the author also makes some advices...