Analysis Of The Impact Of Our Country’s Income Tax Preferential Policy For FDI

Since reform and opening up, in order to attract foreign investment,our country has given some foreign enterprise preferential income tax policies. These policies have played an important in attracting foreign capital in the early years of reform and opening up. However, these policies also have some disadvantages. For a long time, to give the foreign enterprise preferential income tax policies equals to,to a certain extent, transfer the tax burden to the domestic enterprise. The unfair tax burden has hindered the healthy development of domestic enterprises. Besides, giving foreign corporate tax reductions also do not accord with China’s accession to WTO Commitments and will intensify international trade friction. With the further development of the reform and opening up, China’s economic development level is increasing day by day,the hardware and software facilities to attract foreign investment is improving and the influence of the preferential tax policies to attract FDI is gradually wreaking. Therefore, the new law on corporate income tax passed in 2008 canceled the tax incentives for foreign enterprises.to reform the existing preferential tax policies. It has been eight years since the new law been promulgated,during this time, how did the things change about china’s attracting FDI? How are these changes related to the new preferential income tax policies? This article will use the method combining theoretical and empirical research to study on this issue.In the theoretical research part, this paper firstly reviews the previous research achievements in the field. Secondly,this article reviews theories about the mechanism how the preferential tax policies influence FDI and theories about the influencing factors of FDI. In addition, this article also briefly describes the main history of the preferential tax policies since the reform and opening up. In the empirical part, this paper analysis the scale, quality and structure of FDI in China by using the data after the reform and opening-up. Later, this paper tests the influence of the preferential income tax policies to attract FDI in China by using the Panel Data of 36 cities.The result of this article suggested that the preferential income tax policies has a significant effect on attracting FDI in our country, but is not the major impact. However, the use of foreign capital for still plays an important role in the development of China. Therefore, we should deepen the reform of the current preferential income tax policies, keep reasonable preferentialincome tax policies and replace the original preferential income tax policies for certain ownership or certain region by the policies for some certain industries. Finally, based on the research conclusion in this paper, the author puts forward the corresponding policy recommendations.