Analysis on Consolidation of the Two Taxes and Its Influence on Enterprises
Abstract
As the continuous improvement of socialist market system in China, the negative effects brought by double standard based on different laws are increasingly obvious. Unifying the income tax system for foreign-funded enterprises in China is the inevitable tax reform. In 2008 the implementation of the new enterprise income tax law is in accordance with the overall requirements of market economy development. According to the principles of simple tax system, wide tax base, low tax rate and rude administration, the new tax law proposes the "four reunification", that is unify the enterprise income tax rates between domestic enterprises and foreign-invested enterprises, and unify and regulate on pre-payment tax reduction and preferential taxation policies. This article analyzes on consolidation of the two taxes with emphasis to the influence of enterprises. With the implementation of new tax law, the domestic capital enterprise and the overseas-funded enterprise under the same income tax standard to compete fairly so that the competitiveness of domestic enterprises will be greatly enhanced. Although the total FDI (foreign direct investment) will be affected to a certain extent by the consolidation of the two taxes, it will improve the quality of investment and promote the upgrading of industrial structure and the progression of science and technology. This paper concludes that the consolidation of the two taxes should be regarded dialectically and objectively. The competitiveness of domestic enterprises will be greatly enhanced, while foreign-funded enterprises will not have much impact. And at the end of the article, the author makes some recommendations about how enterprises should deal with the change of policy.
Key Words:Consolidation of the Two Taxes;Tax Preference;Tax Rate;Deduction Standard