Tax competition for FDI: China’s exceptional approach

Kate Hynes, Yongzheng Liu, Jie Ma, Ian Wooton

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)
43 Downloads (Pure)


In this Policy Watch study, we explore the different approaches to corporate income tax (CIT) setting in three economically significant regions: USA, EU, and People’s Republic of China (PRC). We characterize tax-setting in the three regions as occurring at three hierarchical levels and examine the impact of this on tax competition. We find that there is considerable heterogeneity across the regions. The approach in the PRC is particularly notable. While the PRC has established centralized rate of CIT at the highest level, it is unique in having a tax-sharing system with its lower tiers of government. This connection between the different levels of government within the PRC plays a crucial role in China’s unique CIT rate-setting agenda that results in intense and tacit inter-jurisdictional tax competition.

Original languageEnglish
Number of pages27
JournalInternational Tax and Public Finance
Early online date30 Nov 2021
Publication statusE-pub ahead of print - 30 Nov 2021


  • tax competition
  • FDI
  • China
  • exceptionalism
  • corporate income tax (CIT)
  • People's Republic of China (PRC)


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