A Study On The International Tax Competition And Coordination In China-ASEAN Free Trade Ares

With the development of economic regionalization and globalization, on Jan1st.2010. the China-ASEAN free trade area (CAFTA) established. China and ASEAN are closely connected with each other, especially in economic area (like international trade, capital investment, etc), and they have great potential in future cooperation. However, in recent years, the member countries have taken many measures to decrease the tax burden to attract the foreign capital to flow in their own countries. There exist the phenomenon of foreign capital transfer and harmful tax competition among the free trade area. What’s more, after the establishment of CAFTA, the capital investment flows more quickly and frequently, which will deteriorate the above phenomenon and make bad effect for the free trade area’s development. It is demonstrated by the classic theories and EU’s practice that tax coordination is necessary. Until now, CAFTA has made great progress in tariff coordination by means of many tax agreements, but the coordination of other taxes are falling behind. Compared with the foreign scholars, the domestic scholars are more inclined to choose CAFTA as their research object and they usually focus on the depiction of the current situation. Therefore, the empirical study is extremely rare. How to examine the international tax competition’s existence and the welfare effects of international tax coordination in CAFTA, and how to formulate the rational strategies against the current problems are urgently to be resolved.Based on the classic literature, this paper firstly makes a systematic review on the theories and empirical study of international tax competition and coordination, and gives an evaluation on the above research. Secondly, it mainly analyzes the current situation of tax competition and coordination in CAFTA with lots of tables and graphs to clearly illustrate the environment. It comes to the conclusions that the methods of tax competition are irrational, the harmful tax competition is existed, and there are many difficulties in tax coordination, like the diverse tax revenue’s structure, the economic development gap among member countries, etc. Thirdly, it demonstrates the existence of tax competition in CAFTA by panel data analysis, and it also gives out the different welfare effects from the member states in the condition of tax coordination simulation. Therefore, the benefits compensation mechanism will be more scientific and applicable. Fourthly, from the enlightenment of tax coordination practice in EU, the paper brings out some targeted measures and strategies as follows: the China and ASEAN should adopt more indirect tax incentives, carry on income tax and added-value tax coordination, establish tax information exchange system, uniform the regulation organization, and build up the benefits compensation mechanism; as for China, it should reform its tax system, make proper use of international tax agreements, strengthen the anti-tax avoidance, etc.