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Impacts of dual tax system on foreign capital status

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  • Yaqi Wang
  • Jingxian Zou

Abstract

Foreign enterprises in China have long enjoyed ‘super‐national treatment’. This paper aims to explore the role of tax benefits in observed transitioning from domestic into foreign enterprise. Using firm‐level data, we find that the preferential tax policies enjoyed by foreign firms increase the probability of transitioning from domestic to foreign firms. To examine the effects of imported foreign direct investment (FDI), we separate introduced FDI into ‘genuine’ and ‘fake’ types according to the share of the host firm's registered capital, and it is seen that only ‘genuine’ FDI can improve the targeted firm's productivity and financial situation.

Suggested Citation

  • Yaqi Wang & Jingxian Zou, 2022. "Impacts of dual tax system on foreign capital status," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 30(1), pages 51-66, January.
    • Handle: RePEc:wly:ectrin:v:30:y:2022:i:1:p:51-66
    DOI: 10.1111/ecot.12275
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    References listed on IDEAS

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