Document Type
Research Paper
Publication Date
1-2018
Subjects
tax competition, FDI, investment, profit
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.
Citation Details
Jing Xing, Wei Cui & Xi Qu, "Local Tax Incentives and Behavior of Foreign Enterprises: Evidence from a Large Developing Country" (2018) Singapore Management University School of Accountancy Research Paper Series 6:1, No 2018-S-71 (Special Issue: Tax).