TITLE:
The Influence of New Enterprise Tax Reform on Foreign Invested Enterprises in China—Based on Computable General Equilibrium (CGE) Analysis
AUTHORS:
Zhiqiang Ye, Liqing Chen, Yaling Shan
KEYWORDS:
Corporate Income Tax, Computable General Equilibrium (CGE), Foreign Direct Investments (FDI)
JOURNAL NAME:
Modern Economy,
Vol.7 No.11,
September
26,
2016
ABSTRACT: The law on new enterprises income tax was executed on
January 1, 2008. Income tax rate for both domestic and foreign enterprises is
25% in China. This paper establishes a Computable General Equilibrium model to
investigate the influence of the new company unified tax rate on foreign
enterprises. This paper uses the 2007 national statistical data to calibrate
parameters and obtains two equilibriums: benchmark equilibrium and 25% unified
tax rate equilibrium. In addition, the influence on foreign enterprises is
investigated through comparing the two equilibriums. This paper researches the
relationship between unified tax rate and foreign direct investments. Finally,
this paper does the sensitivity analysis of the foreign direct investments for
the actual foreign enterprise income tax rate and discount coefficients of
state-owned enterprises’ return on capital.