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

Author

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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. 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.
    2. 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.

    More about this item

    Keywords

    dual corporate income tax; China; unification; foreign funded enterprises;

    JEL classification:

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

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