Publication Type
Magazine Article
Version
Publisher’s Version
Publication Date
1-2018
Abstract
We analyze how profit reporting and investment behavior of foreign enterprises respond to local tax incentives in China, a large developing country. Using firm-level data between 2000 and 2013 from China’s industrial enterprise survey, we first provide strong evidence for tax competition among Chinese cities (especially cities within the same province) over the average effective income tax rate. We then find that, despite stringent capital controls, both reported pre-tax profits and investment of foreign firms respond strongly to local tax incentives, suggesting that subnational tax competition in China is oriented towards both mobile profits and real resources.
Keywords
tax competition, FDI, investment, profit
Discipline
Accounting | Taxation
Volume
6
Issue
1
First Page
1
Last Page
32
Publisher
SSRN
Embargo Period
5-27-2020
Citation
XING, Jing; CUI, Wei; and QI, Xi.
Local tax incentives and behavior of foreign enterprises: evidence from a large developing country. (2018). 6, (1), 1-32.
Available at: https://ink.library.smu.edu.sg/soa_research/1848
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.