(FXStreet) -- In view of analysts at Natixis, the completion of US tax overhaul has created heated debate globally and China is no exception.
“With the reduction in the US corporate tax rate, many fear that Chinese firms, or at least US companies operating in China, may flee to the US to enjoy the newly released tax benefits.”
“We argue that this is highly unlikely for the following reasons.
“As for China’s response, one should recognize that the current fiscal situation does not offer China much room to substantially lower its effective corporate tax rate across the board. However, China can still afford to lower the corporate income tax rate for foreign companies only as it constitutes a very small part of the tax base. In fact, China has already announced a temporarily exemption for foreign firms from taxes for reinvested profits. Still, given that most firms do not actually pay the standard tax rate, it this will not change the current effective corporate tax too much except for a positive signalling effect.”