Tax Administration Uncertainty and FDI in China: Helpful or Harmful?
- YANG Wu &LI Sheng
- Central University of Finance and Economics, 100081.
This paper focuses on the uncertainty in tax law enforcement, namely the relationship between tax administration uncertainty and foreign direct investment. Based on the panel data from 1996 to 2016, tax administration uncertainty is estimated by using the stochastic volatility model (SV model) and the MCMC algorithm according to the measurement of tax administration intensity in each province and the equation of tax law enforcement rules. On this basis, this paper empirically tests the relationship between tax administration uncertainty and foreign direct investment. The empirical results show that the impact of tax administration uncertainty on FDI is related to the tax burden. Tax administration uncertainty promotes FDI when the tax burden is light, while it inhibits FDI in case of a heavy tax burden. Finally, the article puts forward some suggestions on the tax administration uncertainty.
- Tax Administration Uncertainty, Macro Tax Burden, Foreign Direct Investment