Research On The Impacts Of Aggressive Tax Competition On Cross-border Investment

The tax competition occurs with the globalization.There are many countries have adopted tax policy of tax cuts for attracting capital and increasing the capital accumulation.Therefore,it leads to the tax competition when other countries response.Tax competition can be divided into moderate and aggressive tax competition,and the aggressive tax competition also can be called the harmful tax competition.The OECD divided tax competition into aggressive tax competition which is in favor of tax cuts and tax evasion.It put forward some measures about striking aggressive tax competition in latest BEPS report which was issued in 2015.A pharmaceutical company,Perrigo,faced with the heavy income tax burden in the United States.However,its tax burden reduced greatly through the mergers and acquisitions in Ireland,and the registration place moved to Ireland.According to the provisions of the standard of aggressive tax competition in OECD,it has formed the potential harmful tax competition between these two countries through the analysis of harmful factors.The tax competition makes the flow direction of capital and the scale of investment change.The harmful tax competition has an impact on transnational investment.Although it existed tax revenue increase in Ireland,the United States,as a capital exporter,the tax base has erosion.And the principle of tax neutrality was also destroyed.In general,the harmful tax competition affect the allocation of economic resources and destroy the economic development.The direction of capital flows changes because of the aggressive tax competition.In the exporter of capital,the tax revenues and economic growth are affected.Therefore,when China attracts investment and makes investment in foreign country,it should pay attention to the effect of harmful tax competition.At the same time,it should oppose harmful tax competition and promoting healthy competition.