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The Tax Sparing Mechanism and Foreign Direct Investment.

By: Material type: TextTextSeries: IBFD Doctoral SeriesPublisher: Amsterdam : IBFD Publications USA, Incorporated, 2018Copyright date: ©2018Edition: 1st edDescription: 1 online resource (343 pages)Content type:
  • text
Media type:
  • computer
Carrier type:
  • online resource
ISBN:
  • 9789087224844
Subject(s): Genre/Form: Additional physical formats: Print version:: The Tax Sparing Mechanism and Foreign Direct InvestmentDDC classification:
  • 343.04
LOC classification:
  • K3830 .L563 2018
Online resources:
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.
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.
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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.

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.

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Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2024. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.

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