The tax sparing mechanism and foreign direct investment / Na Li.

Format:

Book

Author/Creator:

Li, Na (Professor at East China University of Political Science and Law), author.

Series:

Doctoral series ; Volume 44.

IBFD doctoral series ; Volume 44

Language:

English

Subjects (All):

Tax sparing.

Investments, Foreign (International law).

Physical Description:

1 online resource (343 pages) : illustrations.

Edition:

1st ed.

Place of Publication:

Amsterdam, The Netherlands : IBFD, 2018.

Summary:

This book reviews the rationale of the tax sparing mechanism and analyses its effects within a framework of foreign direct investment from China into EU Member States.

Contents:

Cover

IBFD Doctoral Series

Title

Copyright

Preface

List of Figures and Tables

List of Abbreviations

Chapter 1: Introduction

1.1. Research topic

1.2. Research scope

1.3. Aim of the book and research methodologies

1.4. Structure of the book

Chapter 2: Basic Features

2.1. Introductory remarks

2.2. FDI

2.2.1. Definition

2.2.2. The growth of FDI

2.2.3. Income taxes on FDI

2.2.4. Elimination of double taxation

2.2.4.1. Allocation rules

2.2.4.2. Methods for relief of double taxation

2.3. The tax sparing mechanism

2.3.1. Definition

2.3.2. History

2.3.2.1. The rise

2.3.2.2. Evolution in two camps

2.3.2.3. The fall

2.3.3. Main forms

2.3.3.1. Contingent relief versus matching credit

2.3.3.1.1. Contingent relief

2.3.3.1.2. Matching credit

2.3.3.1.3. A mix of contingent relief and matching credit

2.3.3.2. Unilateral versus reciprocal

2.3.3.3. With a sunset clause or without a sunset clause

2.4. Interaction with contracting states' tax systems

2.4.1. Interaction with the source state's tax system

2.4.1.1. Source state's tax incentives

2.4.1.1.1. Forms and content

2.4.1.1.2. Addressing foreign direct investors or FDI subsidiaries

2.4.1.1.3. Validity period

2.4.1.2. Source state's withholding taxes

2.4.2. Interaction with the residence state's tax system

2.4.2.1. Worldwide income system versus territorial system

2.4.2.1.1. Worldwide income system

2.4.2.1.2. Territorial system

2.4.2.2. Exemption method versus credit method

2.4.2.2.1. Exemption method

2.4.2.2.2. Credit method

2.4.2.3. Controlled foreign corporation rules

2.5. Taxation's effect on FDI

2.5.1. Does taxation influence location and investment decisions?

2.5.2. Do tax incentives influence the location and investment decision?.

2.5.3. Does the tax sparing mechanism affect FDI?

2.5.3.1. Hines' study

2.5.3.2. Azémar, Desbordes and Mucchieli's study

2.5.3.3. Azémar and Delios' study

2.6. Summary

Chapter 3: Is the Tax Sparing Mechanism a Foreign-Aid Tool?

3.1. Introductory remarks

3.2. The tax sparing mechanism as a foreign-aid tool

3.2.1. Rationale

3.2.2. Used by developed countries to help developing countries

3.2.3. Approaches of selected countries and the OECD

3.2.3.1. The United Kingdom

3.2.3.2. The United States

3.2.3.3. The OECD

3.2.3.3.1. Acceptable attitude in the Commentary on the 1963 OECD Draft MC

3.2.3.3.2. Positive attitude in the Commentary on the 1977 OECD MC and the 1992 OECD MC

3.2.3.3.3. Negative attitude in the 1998 OECD Tax Sparing Report and in the Commentary on the 2000 OECD MC

3.3. The tax sparing mechanism is not a foreign-aid tool

3.3.1. Rationale

3.3.1.1. A technique for overcoming the inadequacy of the foreign-tax credit method

3.3.1.1.1. Viherkenttä's arguments

3.3.1.1.2. Echo from Laurey's study

3.3.1.2. A mechanism recognizing jurisdiction

3.3.1.2.1. Analysing Schoueri's view

3.3.1.2.2. Echo from Li's argument

3.3.2. Approach of selected countries, the UN and the WTO

3.3.2.1. Japan

3.3.2.1.1. Tax sparing treaty with India

3.3.2.1.2. Reasons for Japan's adoption of the tax sparing mechanism

3.3.2.1.3. The tax sparing mechanism as an interim strategy

3.3.2.2. Singapore

3.3.2.2.1. In the position of residence state

3.3.2.2.2. In the position of source state

3.3.2.3. Brazil

3.3.2.3.1. Preference for the matching-credit scheme

3.3.2.3.2. Recognition of source state's sovereignty

3.3.2.3.3. Changing to a position of residence state

3.3.2.4. China

3.3.2.4.1. Broad tax sparing treaties network

3.3.2.4.2. Evolving tax sparing policy.

3.3.2.5. The UN

3.3.2.6. The WTO

3.4. Author's opinion

3.4.1. The tax sparing mechanism is not a foreign-aid tool

3.4.1.1. Which state sacrifices its tax revenue?

3.4.1.1.1. Contingent relief

3.4.1.1.2. Matching credit

3.4.1.1.3. Summary

3.4.1.2. Who benefits from the spared taxes?

3.4.1.2.1. Taxpayer

3.4.1.2.2. Source state

3.4.1.2.3. Residence state

3.4.1.3. Tax sparing changes a two-party game into a three-party game

3.4.1.4. Revisit the tax sparing mechanism under the investment setting of the FDI flowing from developing countries to developed countries

3.4.1.4.1. Interaction between the tax systems of developed countries and developing countries

3.4.1.4.2. The tax sparing mechanism preserving spared taxes in developed countries

3.4.2. The tax sparing mechanism is a technique that could be used by both residence state and source state

3.4.2.1. Negotiating a tax sparing provision

3.4.2.1.1. Which form of the tax sparing mechanism?

3.4.2.1.2. Attaching a sunset period?

3.4.2.2. How to counteract the negative effects of the tax sparing mechanism

3.4.2.2.1. Promoting excessive repatriation of profits

3.4.2.2.2. Potential abuse of tax sparing provisions

Chapter 4: The Tax Sparing Mechanism's Effect on Chinese FDI in EU Member States

4.1. Introductory remarks

4.2. Chinese FDIs in EU Member States

4.2.1. Overview

4.2.2. Increasing flows and stocks

4.2.3. Uneven distribution

4.3. Tax sparing mechanism between China and EU Member States

4.3.1. Overview

4.3.2. Reciprocal tax sparing mechanism

4.3.2.1. Italy

4.3.2.1.1. Tax sparing provision

4.3.2.1.2. Effects on Chinese FDI in Italy

4.3.2.2. Slovakia

4.3.2.2.1. Tax sparing provision

4.3.2.2.2. Effects on Chinese FDI in Slovakia

4.3.2.3. Bulgaria

4.3.2.3.1. Tax sparing provision.

4.3.2.3.2. Effects on Chinese FDI in Bulgaria

4.3.2.4. Cyprus

4.3.2.4.1. Tax sparing provision

4.3.2.4.2. Effects on Chinese FDI in Cyprus

4.3.2.5. Portugal

4.3.2.5.1. Tax sparing provision

4.3.2.5.2. Sunset clause

4.3.2.5.3. Effects on Chinese FDI in Portugal

4.3.3. Unilateral tax sparing mechanism

4.3.3.1. Matching-credit scheme not attached with a sunset period

4.3.3.2. Matching-credit scheme with a sunset period

4.3.4. No tax sparing mechanism

4.3.5. Tax sparing mechanism between the EU candidate countries and potential candidate countries with China

4.4. Theoretical analysis: Tax sparing mechanism should benefit both China and EU Member States

4.4.1. China - From residence state perspective

4.4.1.1. Foreign tax credit method

4.4.1.1.1. Direct credit

4.4.1.1.2. Indirect credit

4.4.1.2. CFC rules

4.4.1.2.1. Control test

4.4.1.2.2. Low-tax jurisdiction

4.4.1.2.3. Exceptional cases

4.4.1.3. Increasing importance of the tax sparing mechanism

4.4.2. EU Member States - From a source state perspective

4.4.2.1. EU Member States' tax incentives

4.4.2.2. EU Member States' withholding taxes

4.4.3. Comparison of the global tax burden of a Chinese investor setting up an FDI subsidiary in EU Member States with or without a tax sparing mechanism

4.5. Policy implications

4.5.1. Review the taxing rights allocation rules in the tax treaties between EU Member States and China

4.5.1.1. Permanent establishment

4.5.1.1.1. Construction site

4.5.1.1.2. Service PE

4.5.1.2. Maximum withholding tax rates

4.5.1.3. Other income clause

4.5.2. Policy suggestion to China: Resume using tax sparing mechanisms

4.5.3. Policy suggestion to EU Member States: One uniform tax sparing mechanism for all EU Member States

4.5.3.1. An analysis under game theory.

4.5.3.1.1. Setting of the model

4.5.3.1.2. Strategy choices

4.5.3.1.3. Symmetric information possession

4.5.3.2. Implementing approaches

4.5.3.3. A proposal for a model tax sparing provision

4.5.4. Tax competition

4.5.4.1. Positive and negative effects of tax competition

4.5.4.2. OECD's approach

4.5.4.3. European Union's approach

4.5.4.3.1. Code of Conduct

4.5.4.3.2. Fundamental freedom

4.5.4.3.3. State aid rules

4.5.4.4. When EU Member States are in the position of residence state

4.5.4.4.1. Concerns about the tax sparing mechanism itself as a State aid measure

4.5.4.4.2. Analysis of whether the tax sparing mechanism itself constitutes a State aid measure

4.5.4.4.2.1. Involving a transfer of State resources

4.5.4.4.2.2. Entailing an economic advantage for undertakings

4.5.4.4.2.3. Measures must be specific or selective in favouring certain undertakings or the production of certain goods

4.5.4.4.2.4. Distorting competition and trade between EU Member States

4.5.4.5. When EU Member States are in the position of source state

4.5.4.5.1. Concerns that EU Member States' tax sparing measures are State aid measures

4.5.4.5.2. Analysis of whether EU Member States' tax incentives are State aid measures

4.5.4.5.3. Competing with non-EU Member States

4.6. Concluding remarks

Chapter 5: Conclusion

Annex 1 Chinese Tax Treaties with 101 Jurisdictions, Focusing on Tax Sparing Provisions

Annex 2 Tax Treaties between China and EU Member States, EU Candidate Countries and Potential Candidate Countries, Focusing on Tax Sparing Provisions

Annex 3 An Example of Applying the Foreign-Tax Credit Method in China

References

Other Titles in the IBFD Doctoral Series.

Notes:

"Degree awarded on 9 June 2015".

"NUR 826".

"Thesis submitted to the Vienna University of Economics and Business (WU) in fulfilment of the requirements for the degree of Doctor of Philosophy.

Includes bibliographical references (pages 305-317) and index.

Description based on print version record.

Description based on publisher supplied metadata and other sources.

ISBN:

90-8722-484-2

OCLC:

1151197963