Tax incentives for the attraction of foreign investors into China

These preferential income tax policies played an important role in attracting FDI in the early stage of China's reform and opening up. However, these income tax incentives also have some drawbacks. For a long time, the preferential income tax policy granted to foreign enterprises is equivalent to transferring the tax burden to domestic enterprises to a certain extent, and this unfair tax burden hinders the healthy development of domestic enterprises. In addition, granting tax incentives to foreign enterprises is not in line with China's commitments when it joined the WTO, and will aggravate international trade frictions. China's economic development level is improving day by day, China's software and hardware facilities to attract FDI have been continuously improved, and the influence of preferential tax policies in attracting FDI has gradually weakened. Therefore, in the new enterprise income tax law promulgated successively, the original preferential tax policies have been reformed and the tax incentives for foreign enterprises have been abolished. How has China's FDI attraction changed during this period, and how are these changes related to the new preferential corporate income tax policy? This paper will use a combination to study this problem. In the theoretical research part, this paper first reviews the research results of predecessors in this field; Secondly, this paper reviews the theory of the influence mechanism of preferential tax policies on FDI and the factors affecting FDI. In addition, this paper also briefly describes the historical evolution of China's main preferential tax policies since the reform and opening up. In the empirical part, this paper first analyzes the changes in the scale, quality and structure of FDI in China by using data since the reform and opening up, and analyzes the reasons for this. Then, this paper uses panel data from 34 cities to examine the impact of China's preferential income tax policies on attracting FDI. The research found in this paper shows that the preferential income tax policy has a significant impact on China's FDI attraction, but it is not the most important impact. However, the use of foreign capital still plays an important role in China's current development, so we must deepen the current reform of preferential income tax policies, retain reasonable preferential income tax policies, and replace the original preferential income tax policies according to ownership and region with industry-specific preferential income tax policies. Finally, based on the conclusions of this paper, the author would put forward corresponding policy recommendations.