Research On The Income Tax Reform In China

In order to promote China's economic development and improve the level of opening to the outside world, China's domestic and foreign-funded enterprise have two sets of tax laws, foreign-invested enterprises enjoy the super-national treatment, tax incentives . There is no denying that China's enterprise income tax preferential policies attract foreign investment, technology and talent. However,the problem hidden in the two sets of taxes system gradually appearing, long-standing of two sets of income tax system is no longer the pattern in line with international practice, but also hindered the further development of China's economy. Income tax reform become a new round of major tax reform initiatives. March 16, 2007, the Fifth Session of the Tenth National People's Congress passed the closing session of the People's Republic of China Enterprise Income Tax Law. The pass of the draft means China's enterprise income tax will gradually bid farewell to "two-track" Time. Unified income tax rate will be set at 25%. Corporate income tax revenue has become the main taxe in China's tax systems, corporate income tax revenue of the high degree of dependence. The tax reform can bring about improvements in social welfare, the purpose of optimizing the revenue of the Government and business issues are common concern. We should note that the adoption of income tax reform to reduce a degree of financial capital to promote enterprise development in order to achieve and create a fair environment, It is necessary to ensure that the basis of financial stability to carry out. At present, the new enterprise income tax has been implemented for a year's time, however, the result of reform is key. In this paper,based on the the tax elastic, OLI theory, etc.,analysis of the difference between the old and the new enterprise income tax and the impact on related industries, carry out the analysis and interpretation in financial income and the impact of FDI, on the basis of Jiangsu Province as an example, and linear regression equation through the establishment of tax factors and to verify the relevance of FDI.1. Research on Domestic and foreign enterprise income tax reform. The study on tax factors and FDI, the study on the income tax reform provide the theoretical basis for the actual performance. This article holds that the previous scholars has conducted an in-depth study, but new corporate income tax took effect since January 1, 2008 ,domestic scholars rarely take advantage of the latest data of the income tax reform, Based on this official results of the study have been analyzed and summarized, to find the entry point for this study, this article focus on using the latest data from income tax reform revenue to analysis conducted empirical studies as well as the latest data on tax revenue and the relevance of FDI for the regression analysis. In order to arrive at the revenue and foreign direct investment in the real impact.2. Differences between the old and the new income tax and the impact on related industries. First of all, a general overview of the difference between the old and the new enterprise income tax. This article holds that the maximum difference of two taxes is characterized by "unified" and "transition", which "unification" in the first capital, both foreign-funded enterprises to adapt to the new Enterprise Income Tax Law; Second, a unified tax rate of 25 %; Third, a unified pre-tax deduction methods and standards; Fourth, preferential tax policies for reunification, "transitional" in the old enterprises to set a five-year transition period. Tax reform to reduce the impact of foreign-funded enterprises. tax rates, deductions, tax incentives three difference on a comparative analysis. Tax rates, the new income tax both in the benchmark rate or the concessionary duty rate of greater declines. The name of the new tax rate on the adjustment of domestic-funded enterprises is beneficial to the whole, but in different sectors have a good degree of difference, even on the part of the industry will have certain negative effects. A positive impact on the industry is still primarily a negative impact on related industries under the old tax burden is higher than or lower than the current benchmark rate of 25%. After the deduction, since the new tax deduction on the taxable wages to expand the scope to make the industry a high human cost benefits more. Expansion of the new tax law limits deductions on advertising expenses to enable the business advertising and publicity expenses greater proportion of the industry has a direct positive. In tax incentives, the old Enterprise Income Tax Law to the pattern of regional-based preferences, but the new enterprise income tax concessions to industry-based, supplemented by regional preferences and takes into account the social progress of the new tax structure. The implementation of the new tax law so that industry can enjoy tax preferential decline in the industry, the state should not be encouraged or even prohibited by the industry not be able to enjoy preferential trade, so relatively small changes in corporate tax burden, does not have an impact on these enterprises.3. The reasons and influence of the income tax reformFirst of all, this article from the New Institutional Economics for the definition of a balanced tax system, the analysis of the reasons for changes in the tax system. Income tax reform is a tax reform is the tax system from one another to achieve a balanced equilibrium. Analysis of the actual situation, our country is no longer a merger of the two tax net income to maximize the institutional arrangements, the scope of corporate income tax and levy burden needs to redefine. And the Pareto improvement of the institutional reason for this is that the emergence of new profit opportunities, then our country should be a income tax reform in the current tax system on the results of cost-benefit trade-offs, that is, from the new institutional economics point of view, is to make now tax system to optimize the non-equilibrium, to reach a new equilibrium. Secondly, from the short and long-term perspective, respectively, pointed out that the merger of the two tax revenue In fact, the combined tax revenue of China's impact is inevitable. In theory, the enterprise income tax in the short term is likely to reduce income, but the long term corporate income tax will be increased revenue. However, China's enterprise income tax revenue in 2008, an increase of 239.38 billion up 27.3 percent, the author analyzes the reasons for the increase in corporate income tax. Once again, from both short and long-term analysis of tax impact of merger on the FDI. This article holds that, in the short term, the two tax merger of the early introduction of foreign investment has decreased the number, is normal. In the long term, the two tax merger would not attract foreign investment have a big impact, its effect is positive. Finally, an analysis of the merger of the two tax changes in the mode of economic growth, promote industrial upgrading and the establishment of a fair competition environment.4. Empirical analysis of the Revenue impact of the income tax reform.This section is the focus of this article. First of all, the merger of the two tax revenue impact of the model building, model tax basis of the principles of flexibility, in view of the two tax merger policy, the reality of a year, in order to analyze the two tax merger of the actual performance, so that tax policy reform to adapt to economic development, tax revenue to build a flexible model-based analysis of this model, that is, from a practical point of view, focus on long-term consideration, the use of normative analysis, analytical methods such as quantitative analysis. Have some practical significance. Secondly, the City of Jiangsu empirical analysis of the two tax merger Jiangsu revenue. Jiangsu implemented through the analysis showed that at the two tax merger and financial principles, the two tax merger policy implementation in Jiangsu Province has a positive effect.5. Empirical Analysis of the relationship of FDI and tax incomePreviously, put forward by scholars to verify the theory, and merge the two tax policy to improve the theory and analysis to provide a basis to set up foreign direct investment and its impact factors of various statistical models to analyze the impact of the income tax burden. Based on the above analysis of model results and explain the economic implications, the following conclusions: national or regional level of economic development and openness of the impact of foreign direct investment is a key factor, and GDP and the openness of the positive correlation with FDI. And income factors on the role of FDI was not obvious. This shows that tax incentives for attracting foreign investment will have limited impact. Therefore, unifying the income tax reform, although foreign-invested enterprises will increase to some extent, the income tax burden on foreign-funded enterprises, but will not be affected foreign investment in China.6. Conclusions and Suggestions. In this paper, obtained by studying thefollowing conclusions: a national merger of the two tax revenue from the actual situation, not a negative impact on revenue. And unification of income tax reform, foreign-funded enterprises within a certain extent, although the foreign-funded enterprises to increase the income tax burden, but will not affect foreign investment in China. Given by studying the merger of the two tax proposals provide a solution: to optimize the structure of financial expenditure is a fundamental solution to the merger of the two tax revenue to reduce the key to the problem. Treatment of foreign investment should take the following policy: setting the transition period, holding the stock of foreign investment; policy guidance, adjusting the capital structure; improve the investment environment, enhance the investment attractiveness.