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China's Enterprise Income Tax System: Policy Objectives and Key Design Features

The increasing importance of China to Australian businesses dictates the need to have a good understanding of the Chinese corporate tax system. Due to the different economic and legal environment, some provisions of the EIT Law may come as a surprise to foreign observers. This is so despite that the Chinese tax system has become more sophisticated and its government in general has strived to align its tax policies with international norms in recent years. The aim of this paper is to identify and analyse three key policy objectives of the EIT Law - namely, neutrality, competitiveness and anti-avoidance - which provide the framework for a better understanding of the regime. These policy objectives have shaped to a large extent the EIT Law in China. This paper critically evaluates how these three policy objectives were achieved through the design of key features and provisions of the EIT Law. The analysis also serves to highlight some interesting differences with their Australian counterparts wherever appropriate.