INTERACTIONS BETWEEN CHINESE TAX INCENTIVES AND WTO'S SUBSIDY RULES AGAINST THE BACKGROUND OF... EU STATE AID

The book provides insights to the alleviation of tensions between Chinese tax incentives and the WTO’s subsidy rules, thus further offering implications for both China and the WTO on integrating in the world economy. Moreover, doing a comparative study with EU State aid law can also provide China with a source of inspiration for reviewing its legal mechanism in respect of tax incentives and the WTO for rethinking its subsidy rules with regard to achieving its objectives and purposes. Academics and students in related subject will be interested to read the book. Practitioners doing business related to China, EU and international trade can be very interested in this book. Policymakers in both China and EU can also get valuable knowledge and inspiration from the book. Acknowledgements Contents Abbreviations 1 Introduction 1.1 Research Background 1.1.1 Subsidy Rules of the WTO 1.1.2 Tax Incentives as Subsidies 1.1.3 EU State Aid Law 1.1.4 Chinese Tax Incentives and the WTO 1.1.5 The Evolution of Chinese Tax Incentives 1.2 State of the Art 1.3 Research Questions and Methodology 1.3.1 Main Research Questions 1.3.2 Sub-questions 1.3.3 Methodology 1.4 Limitations 1.5 Relevance of the Research 1.6 Structure of the Research References 2 Overview of Tax Incentives as Subsidies in the Context of International Trade and Competition: Rationale for Granting and Regulating Tax Incentives 2.1 Introduction 2.2 Overview of Subsidies 2.2.1 Premise 2.2.2 Concept of Subsidies 2.3 Tax Incentives as Subsidies 2.3.1 Concept of Tax Incentives 2.3.2 Tax Incentives as Subsidies 2.3.3 Tax Incentives and Tax Expenditures 2.3.4 Tax Incentives as a Method of Tax Competition 2.4 Rationale for Granting Tax Incentives as Subsidies 2.4.1 Efficiency Rationale 2.4.2 Equity Rationale 2.4.3 Sound Tax Competition 2.5 Rationale for Regulating Tax Incentives as Subsidies 2.5.1 Efficiency Rationale 2.5.2 Equity Rationale 2.5.3 Harmful Tax Competition 2.6 Matrix: Comparing the Rationale for Granting and Regulating Tax Incentives 2.7 International Legal Regulation of Tax Incentives 2.7.1 Benchmarks for Regulation: Efficiency and Equity 2.7.2 Regulating the Harmful Effects of Tax Incentives 2.7.3 Legal Regulation Based on the Rule of Law 2.7.4 International Regulation 2.8 Conclusion References 3 Subsidy Rules of the WTO and State Aid Law in the EU 3.1 Introduction 3.2 External Benchmark: Based on the Common Object and Purpose of the WTO’s Subsidy Rules and EU State Aid 3.2.1 Introduction 3.2.2 The WTO Regulation of Subsidies 3.2.3 The European Union’s Regulation of State Aid 3.2.4 External Benchmark: The Creation of a Level Playing Field Based on the Common Object and Purpose of the WTO and the EU 3.2.5 Conclusion 3.3 Overview of the Agreement on Subsidies and Countervailing Measures (the ASCM) 3.3.1 Definition of Subsidies 3.3.2 Classification of Subsidies 3.3.3 Remedies 3.3.4 The Impact of the ASCM on Taxation 3.3.5 The Application of the ASCM to Tax Incentives 3.3.6 Conclusion 3.4 Overview on the EU State Aid Law 3.4.1 The Concept of State Aid 3.4.2 Compatible State Aid 3.4.3 Controlling Procedure of State Aid 3.4.4 The Application of the EU State Aid Law to Tax Incentives 3.4.5 Conclusion 3.5 Comparison of Subsidy Rules in the WTO and EU State Aid Law 3.5.1 Preliminary Remarks 3.5.2 Matrix of the Comparison 3.5.3 Reasons for Differences 3.6 Conclusion References 4 The Internal Benchmark and Chinese Tax Incentives 4.1 Introduction 4.2 Chinese Taxation from 1949 to 1978 4.3 Chronological Review of Direct Tax Incentives for FDI 4.3.1 1980–1991: Separate Tax Incentives for FDI in Special Economic Zones (SEZs) 4.3.2 1991–1993: Expansion of Tax Incentives for FDI in the Transition from the Planned Economy to a Socialist Market Economy 4.3.3 1994–2007: Tax Incentives for FDI After the Tax Sharing Reform and China’s Accession to the WTO 4.3.4 2007–2013: Tax Incentives After the New Enterprise Income Tax Law (EIT Law) 4.3.5 Conclusion 4.4 Internal Benchmark: A Level Playing Field for Competition in China 4.4.1 The Background of the Socialist Market Economy 4.4.2 The Socialist Market Economy and the Western Market Economy 4.4.3 Internal Benchmark: A Level Playing Field in China 4.5 Matrix of Tax Incentives in China from 1949 to 2015 4.6 The Present Direct Tax Incentives 4.6.1 Introduction of the EIT Law Regime 4.6.2 Industry-Oriented Tax Incentives 4.6.3 Regional Tax Incentives 4.6.4 Matrix of Specific Direct Tax Incentives 4.6.5 Conclusion 4.7 The Present Value-Added Tax (VAT) Incentives 4.7.1 Overview of the VAT System in China 4.7.2 VAT Incentives 4.7.3 Conclusion 4.8 Conclusion References 5 Testing Chinese Tax Incentives Against the ASCM and EU State Aid Law 5.1 Introduction 5.2 Testing Chinese Tax Incentives Against the ASCM and EU State Aid Law 5.2.1 The WTO: Financial Contribution Made by a Government or Any Public Body and the EU: Aid Granted by a Member State or Through State Resources 5.2.2 The WTO: Benefit Conferred and the EU: Economic Advantage 5.2.3 The WTO: Specificity and the EU: Selectivity 5.2.4 The WTO: Adverse Effects and the EU: Affect Competition and Trade Between Member States 5.2.5 The WTO: Non-actionable Subsidies and the EU: Compatible State Aid 5.2.6 The WTO: Remedies for Actionable Subsidies and the EU: Remedies for Unlawful State Aid 5.3 Matrix of the Testing Results 5.3.1 Matrix of the Testing Results with the ASCM of the WTO 5.3.2 Matrix of the Comparable Testing Results 5.4 Reviewing the Comparable Testing with Benchmarks 5.4.1 Reviewing with the External Benchmark 5.4.2 Reviewing with the Internal Benchmark 5.5 Conclusion References 6 The Origins of the Differences in the Testing Results 6.1 Introduction 6.2 Tensions Between Chinese Tax Incentives and the Western Treatment of Taxation 6.2.1 China: State-Oriented Attitude Towards Taxation Versus The West: Taxation for Public Finance 6.2.2 China: The Lack of Internal Legal Control over the Granting of Chinese Tax Incentives Versus the West: Instrumentality Controlled by the Rule of Law 6.3 The West: The Origin of the Western Treatment of Tax Incentives as Subsidies 6.3.1 The Market-Oriented System 6.3.2 The Rule of Law 6.3.3 The Western Culture Behind the Development of the Market 6.3.4 Conclusion 6.4 China: The Origin of China’s Attitude Towards Tax Incentives 6.4.1 China’s State-Oriented Attitude Towards Tax Incentives 6.4.2 The Lack of Internal Legal Control over the Granting of Tax Incentives 6.4.3 Cultural Influences: Confucianism 6.4.4 Conclusion 6.5 Matrix of the Comparison Between China and the West Towards the Treatment of Tax Incentives 6.6 The Common Platform: Possibilities to Alleviate Tensions 6.6.1 For China 6.6.2 For the WTO 6.7 Conclusion References 7 Recommendations for Chinese Tax Incentives and the Future for the WTO’s Subsidy Rules 7.1 Introduction 7.2 Recommendations for Chinese Tax Incentives 7.2.1 Basis for Recommendations 7.2.2 Recommendations at a Macro Level: Introduction of an Internal Legal Control Over Tax Incentives 7.2.3 Recommendations at a Micro Level 7.3 Future of the WTO’s Subsidy Rules 7.3.1 Reviving Non-actionable Subsidies 7.3.2 Future of the WTO’s Role in Relation to Taxation 7.4 Conclusion References 8 Summary and Conclusions 8.1 Introduction 8.2 Summary of the Research 8.2.1 Tax Incentives as Subsidies in the Context of International Trade and Competition: Rationale for Granting and Regulating 8.2.2 Subsidy Rules of the WTO and State Aid in the EU 8.2.3 Chinese Tax Incentives 8.2.4 Testing of Chinese Tax Incentives Against the ASCM and EU State Aid Law 8.2.5 The Origins of Tensions Between Chinese Tax Incentives and the Western Standards 8.3 Conclusions and Recommendations Appendix Matrix of Subsidy Investigations Against China in the WTO 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