The Impact of Average Effective Tax Rate on China's Foreign Direct Investment: Evidence from 45 Countries

Yue Wang; Gong Liang Tang

doi:doi:10.11648/j.ijber.20190806.12

| Peer-Reviewed

The Impact of Average Effective Tax Rate on China's Foreign Direct Investment: Evidence from 45 Countries

Yue Wang, Gong Liang Tang

Published in International Journal of Business and Economics Research (Volume 8, Issue 6)

Received: 26 July 2019 Accepted: 20 August 2019 Published: 25 September 2019

Views: Downloads:

Download PDF

Share This Article

Twitter
Linked In
Facebook

Abstract

In the open economy, the government always regards improving the national competitiveness as an important strategic goal. The use of tax means is an important way of the application of national macroeconomic policies. How to effectively improve the competitiveness of the international tax system has become a matter of great concern to us. Based on the OECD average effective tax rate model, this paper uses the average effective tax rate as an indicator of the competitiveness of the international tax system to test its impact on China's FDI decision-making. It is found that the lower average effective tax rate of the host country is beneficial to the inflow of FDI. In the process of calculating the average effective tax rate, enterprise income tax is an important tax parameter affecting the marginal average tax rate. In order to improve the competitiveness of China's tax system, it is suggested to promote foreign investment and attract high-quality foreign direct investment. Consider the perfection of tax system from two perspectives of capital.

Published in	International Journal of Business and Economics Research (Volume 8, Issue 6)
DOI	10.11648/j.ijber.20190806.12
Page(s)	339-346
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2019. Published by Science Publishing Group

Keywords

International Tax Competitiveness, OFDI, Average Effective Tax Rate

References

[1]	Bird R M. Taxation and development: what have we learned from fifty years of research [Z]. International Center for Tax and Development, Working Paper, 2012. Tax and Development, Working Paper, 2012.
[2]	Kumar M S, Quinn D P. Globalization and corporate taxation [Z]. International Monetary Fund, Working Paper, 2012.
[3]	Aizenman J, Jinjarek Y. Globalization and developing countries – a shrinking tax base? [J]. Journal of Development Studies, 2009, 45 (5): 653–71.
[4]	Keen M, Konrad K A. International tax competition and coordination [Z]. Max Planck Institute for Tax Law and Public Finance, Working Paper, 2012, 257–328.
[5]	Ganghof S. Adjusting national tax policy to economic internationalization: strategies and outcomes [M]. Oxford: Oxford University Press, 2000, 597–645.
[6]	Swank D, Steinmo S. The new political economy of taxation in advanced capitalist democracies [J]. American Journal of Political Science, 2002, 46 (3): 642–55.
[7]	Keen M, Simone A. Is tax competition harming developing countries more than developed?’ [J]. Tax Notes International, 2004, 34 (13): 1317–26.
[8]	Peter K S, Buttrick S, Duncan D. Global reform of personal income taxation 1981–2005: evidence from 189 countries [J]. National Tax Journal, 2010, 63 (3): 447–478.
[9]	King M A, Fullerton D. The taxation of income from capital: a comparisons of effective tax rates [R]. 1983, 278 (2): 121-136.
[10]	Devereux M P, Griffith R. Evaluating Tax Policy for Location Decisions [J]. International Tax and Public Finance, 2003, (10): 107–126.
[11]	Devereux M P, Freeman H. The Impact of Tax on Foreign Direct Investment: Empirical Evidence and the Implications for Tax Integration Schemes [J]. International Tax and Public Finance, 1995, 2 (1): 85-106.
[12]	Hanappi T. Corporate Effective Tax Rates—Model Description and Results From 36 OECD and Non-OECD Countries [R]. Paris: OECD, 2018, 7.
[13]	Oxford University Centre for Business Taxation. Business Taxation under the Coalition Government [R]. Oxford: Oxford University Centre For Business Taxation, 2015, 5.
[14]	Matthews S. What is a "Competitive" Tax System? [R]. Paris: OECD, 2011, 7.
[15]	Egger P, Raff H. Tax rate and tax base competition for foreign direct investment [J]. International Tax Public Finance, 2014, 22 (5): 777-810.
[16]	Tax Foundation. International Tax Competitiveness Index 2018 [R]. Washington, DC: Tax Foundation, 2018, 10.

Cite This Article

Plain Text BibTeX RIS

APA Style

Yue Wang, Gong Liang Tang. (2019). The Impact of Average Effective Tax Rate on China's Foreign Direct Investment: Evidence from 45 Countries. International Journal of Business and Economics Research, 8(6), 339-346. https://doi.org/10.11648/j.ijber.20190806.12

Copy | Download

ACS Style

Yue Wang; Gong Liang Tang. The Impact of Average Effective Tax Rate on China's Foreign Direct Investment: Evidence from 45 Countries. Int. J. Bus. Econ. Res. 2019, 8(6), 339-346. doi: 10.11648/j.ijber.20190806.12

Copy | Download

AMA Style

Yue Wang, Gong Liang Tang. The Impact of Average Effective Tax Rate on China's Foreign Direct Investment: Evidence from 45 Countries. Int J Bus Econ Res. 2019;8(6):339-346. doi: 10.11648/j.ijber.20190806.12

Copy | Download

@article{10.11648/j.ijber.20190806.12,
  author = {Yue Wang and Gong Liang Tang},
  title = {The Impact of Average Effective Tax Rate on China's Foreign Direct Investment: Evidence from 45 Countries},
  journal = {International Journal of Business and Economics Research},
  volume = {8},
  number = {6},
  pages = {339-346},
  doi = {10.11648/j.ijber.20190806.12},
  url = {https://doi.org/10.11648/j.ijber.20190806.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20190806.12},
  abstract = {In the open economy, the government always regards improving the national competitiveness as an important strategic goal. The use of tax means is an important way of the application of national macroeconomic policies. How to effectively improve the competitiveness of the international tax system has become a matter of great concern to us. Based on the OECD average effective tax rate model, this paper uses the average effective tax rate as an indicator of the competitiveness of the international tax system to test its impact on China's FDI decision-making. It is found that the lower average effective tax rate of the host country is beneficial to the inflow of FDI. In the process of calculating the average effective tax rate, enterprise income tax is an important tax parameter affecting the marginal average tax rate. In order to improve the competitiveness of China's tax system, it is suggested to promote foreign investment and attract high-quality foreign direct investment. Consider the perfection of tax system from two perspectives of capital.},
 year = {2019}
}

Copy | Download

TY  - JOUR
T1  - The Impact of Average Effective Tax Rate on China's Foreign Direct Investment: Evidence from 45 Countries
AU  - Yue Wang
AU  - Gong Liang Tang
Y1  - 2019/09/25
PY  - 2019
N1  - https://doi.org/10.11648/j.ijber.20190806.12
DO  - 10.11648/j.ijber.20190806.12
T2  - International Journal of Business and Economics Research
JF  - International Journal of Business and Economics Research
JO  - International Journal of Business and Economics Research
SP  - 339
EP  - 346
PB  - Science Publishing Group
SN  - 2328-756X
UR  - https://doi.org/10.11648/j.ijber.20190806.12
AB  - In the open economy, the government always regards improving the national competitiveness as an important strategic goal. The use of tax means is an important way of the application of national macroeconomic policies. How to effectively improve the competitiveness of the international tax system has become a matter of great concern to us. Based on the OECD average effective tax rate model, this paper uses the average effective tax rate as an indicator of the competitiveness of the international tax system to test its impact on China's FDI decision-making. It is found that the lower average effective tax rate of the host country is beneficial to the inflow of FDI. In the process of calculating the average effective tax rate, enterprise income tax is an important tax parameter affecting the marginal average tax rate. In order to improve the competitiveness of China's tax system, it is suggested to promote foreign investment and attract high-quality foreign direct investment. Consider the perfection of tax system from two perspectives of capital.
VL  - 8
IS  - 6
ER  -

Copy | Download

Author Information

Yue Wang

The School of Public Finance and Taxation, Central University of Finance and Economics, Beijing, China
Gong Liang Tang

The School of Public Finance and Taxation, Central University of Finance and Economics, Beijing, China

Download PDF

Sections

Plain Text BibTeX RIS

APA Style

Yue Wang, Gong Liang Tang. (2019). The Impact of Average Effective Tax Rate on China's Foreign Direct Investment: Evidence from 45 Countries. International Journal of Business and Economics Research, 8(6), 339-346. https://doi.org/10.11648/j.ijber.20190806.12

Copy | Download

ACS Style

Yue Wang; Gong Liang Tang. The Impact of Average Effective Tax Rate on China's Foreign Direct Investment: Evidence from 45 Countries. Int. J. Bus. Econ. Res. 2019, 8(6), 339-346. doi: 10.11648/j.ijber.20190806.12

Copy | Download

AMA Style

Yue Wang, Gong Liang Tang. The Impact of Average Effective Tax Rate on China's Foreign Direct Investment: Evidence from 45 Countries. Int J Bus Econ Res. 2019;8(6):339-346. doi: 10.11648/j.ijber.20190806.12

Copy | Download

@article{10.11648/j.ijber.20190806.12,
  author = {Yue Wang and Gong Liang Tang},
  title = {The Impact of Average Effective Tax Rate on China's Foreign Direct Investment: Evidence from 45 Countries},
  journal = {International Journal of Business and Economics Research},
  volume = {8},
  number = {6},
  pages = {339-346},
  doi = {10.11648/j.ijber.20190806.12},
  url = {https://doi.org/10.11648/j.ijber.20190806.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20190806.12},
  abstract = {In the open economy, the government always regards improving the national competitiveness as an important strategic goal. The use of tax means is an important way of the application of national macroeconomic policies. How to effectively improve the competitiveness of the international tax system has become a matter of great concern to us. Based on the OECD average effective tax rate model, this paper uses the average effective tax rate as an indicator of the competitiveness of the international tax system to test its impact on China's FDI decision-making. It is found that the lower average effective tax rate of the host country is beneficial to the inflow of FDI. In the process of calculating the average effective tax rate, enterprise income tax is an important tax parameter affecting the marginal average tax rate. In order to improve the competitiveness of China's tax system, it is suggested to promote foreign investment and attract high-quality foreign direct investment. Consider the perfection of tax system from two perspectives of capital.},
 year = {2019}
}

Copy | Download

TY  - JOUR
T1  - The Impact of Average Effective Tax Rate on China's Foreign Direct Investment: Evidence from 45 Countries
AU  - Yue Wang
AU  - Gong Liang Tang
Y1  - 2019/09/25
PY  - 2019
N1  - https://doi.org/10.11648/j.ijber.20190806.12
DO  - 10.11648/j.ijber.20190806.12
T2  - International Journal of Business and Economics Research
JF  - International Journal of Business and Economics Research
JO  - International Journal of Business and Economics Research
SP  - 339
EP  - 346
PB  - Science Publishing Group
SN  - 2328-756X
UR  - https://doi.org/10.11648/j.ijber.20190806.12
AB  - In the open economy, the government always regards improving the national competitiveness as an important strategic goal. The use of tax means is an important way of the application of national macroeconomic policies. How to effectively improve the competitiveness of the international tax system has become a matter of great concern to us. Based on the OECD average effective tax rate model, this paper uses the average effective tax rate as an indicator of the competitiveness of the international tax system to test its impact on China's FDI decision-making. It is found that the lower average effective tax rate of the host country is beneficial to the inflow of FDI. In the process of calculating the average effective tax rate, enterprise income tax is an important tax parameter affecting the marginal average tax rate. In order to improve the competitiveness of China's tax system, it is suggested to promote foreign investment and attract high-quality foreign direct investment. Consider the perfection of tax system from two perspectives of capital.
VL  - 8
IS  - 6
ER  -

Copy | Download