Research On The Influence Of Bilateral Tax Treaties Of Chinese Enterprises’ OFDI

Since China’s accession to the World Trade Organization and the implementation of the "going out" strategy,the level of opening-up has been greatly improved,and the scale of OFDI has continued to expand.By the end of2021,China’s OFDI stock has reached US $2.79 trillion,and China has become a well-deserved foreign investment country.At the same time,Chinese enterprises are facing more and more complex international tax issues in the increasingly frequent foreign-related economic activities.Among them,double taxation has the most direct and significant impact on enterprises,hindering the cross-border circulation and optimal allocation of capital in China.Bilateral tax treaties are the legal basis for the coordination of tax distribution among sovereign countries.They can avoid double taxation,improve tax stability,and to a certain extent promote Chinese enterprises to carry out foreign direct investment activities.Firstly,this paper gives a comprehensive account of the signing of bilateral tax treaties in China,the situation of OFDI in China and the relationship between the two,and analyzes and deduces the mechanism of the effect of bilateral tax treaties on OFDI from the theory of international tax coordination,the theory of combination of investment inducing factors and the theory of institutions: bilateral tax treaties promote OFDI by avoiding double taxation,reducing tax risks and improving investment returns.Secondly,in terms of empirical evidence,this paper selects the stock of OFDI in China during the period 2003-2020 and applies the multi-period double difference method to study the impact of bilateral tax treaties on OFDI in China,and further introduces the institutional distance between the two countries as a moderating variable to test the moderating effect.Finally,the heterogeneity of the impact of bilateral tax treaties on OFDI is further analysed according to the terms of different agreements,countries with different income levels and countries with different tax burden levels.Through empirical analysis,this paper draws the following four conclusions:First,the signing of bilateral tax treaties has significantly promoted China’s OFDI,which has also passed a series of robustness tests;Second,institutional distance has a positive regulatory effect on the impact of bilateral tax treaties on OFDI,that is,the farther the institutional distance from the host country,the greater the promotion effect of signing bilateral tax treaties on China’s OFDI.Third,through the analysis of the heterogeneity of bilateral tax treaties,it is found that the extension of the time standard of the labor-based permanent establishment in the treaties plays a more significant role in promoting OFDI;Fourth,through the analysis of the heterogeneity of host countries,it is found that the promotion effect of bilateral tax treaties on China’s OFDI is more significant in high-income and high-tax host countries.Finally,based on the theoretical and empirical results,this paper puts forward the following policy recommendations for China’s future bilateral tax treaties to promote the high-quality development of OFDI: First,accelerate the negotiation of bilateral tax treaties and expand the coverage of the agreements;Second,change China’s position in signing bilateral tax treaties,strive for more initiative,and pay attention to protecting the investment interests of China’s transnational investment enterprises;Third,revise the existing bilateral tax treaties in time according to the level of economic development to ensure their applicability;Fourth,efforts should be made to strengthen the construction of services related to bilateral tax treaties;Fifth,strengthen international tax cooperation,crack down on international tax evasion and avoid the abuse of tax treaties.