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The dual corporate income tax in China: the impact of unification

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  • van der Hoek, M. Peter
  • Kong, Shuhong
  • Li, Zhenzi

Abstract

For many years, foreign funded companies in China enjoyed a relatively low tax rate and a series of preferential policies which were aimed at encouraging foreign direct investment in China. By adopting a new law in 2007, however, the National People's Congress proclaimed the end of the dual corporate-income-tax system. From 2008, the preferential tax treatment of foreign capital will be phased out. As a result, the income tax rate for domestic and foreign funded companies will be unified at the rate of 25%. This paper explores the impact of the dual corporate income tax system on both domestic and foreign funded enterprises and discusses the possible effects of the unification.

Suggested Citation

  • van der Hoek, M. Peter & Kong, Shuhong & Li, Zhenzi, 2008. "The dual corporate income tax in China: the impact of unification," MPRA Paper 11547, University Library of Munich, Germany, revised Aug 2008.
    • Handle: RePEc:pra:mprapa:11547
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    File URL: https://mpra.ub.uni-muenchen.de/11547/1/MPRA_paper_11547.pdf
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    References listed on IDEAS

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    1. John Whalley & Li Wang, 2007. "The Unified Enterprise Tax and SOEs in China," NBER Working Papers 12899, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Qi, Yu & Shao, Shuai & Tian, Zhihua & Xu, Yang & Yin, Jun, 2022. "Environmental consequences of fair competition: Evidence from China's corporate income tax merger policy," Ecological Economics, Elsevier, vol. 195(C).
    2. Tapan Kumar Sarker, 2015. "The role of fiscal sustainability in enhancing sustainable economic growth in South Asia: the case of Bangladesh," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 22(1), pages 143-164, June.
    3. Ji, Jingjing & Ye, Zhiqiang & Zhang, Shunming, 2013. "Welfare analysis on optimal enterprise tax rate in China," Economic Modelling, Elsevier, vol. 33(C), pages 149-158.

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    More about this item

    Keywords

    dual corporate income tax; China; unification; foreign funded enterprises;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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