Corporate Income Tax Reform On China's Inbound Fdi Level Of Empirical Analysis

With the implementation of Corporate Income Tax (CIT) Reform in China from the beginning of 2008, the general tax incentives based on region will be cancelled progressively. As a result, the statutory tax rate of corporate income of foreign companies which enjoyed tax incentives before will largely increase. The concern is whether there will be any negative impacts on the level of inward FDI to China. The paper measures the effective tax burden on capital gains from inward FDI to China with the period from 1997 to 2009, based on the model of Effective Marginal Tax Rate (EMTR). Applying the measuring results, a regression model is built up to investigate the effects of taxation on inward FDI. Then the change to inward FDI to China from 2010 to 2012 is forecasted based on the model. According to the above analysis, the paper answer the question whether the CIT Reform will have any impact on the inward FDI level to China, and furthermore, to what extent.