Public enterprises provide public goods and services to the community, and get the compensation of corporate income tax concessions. In addition to the provision of public goods & services and other non profit activities, public enterprises also engage in competitive business. But if the tax legal system does not distinguish between the above activities, and offers unified income tax concessions, it will bring unfair treatment to competitors of public enterprise business, thereby constituting government subsidies. EU tax preference systems concerning public enterprise can provide China with important experience. On the one hand, the EU regards public enterprises as tax payers; on the other hand, public enterprises can enjoy preferential tax policies in the act of providing services of general economic interests. In addition, the EU has also established a system of applicable rules of services of general economic interests. China should draw lessons from the EU, and reconstruct public enterprise tax preference system. Based on the definition of public enterprises as tax payers, it provides that only business activities of services of general economic interests provided by public enterprises can enjoy preferential tax measures, and if private enterprises allowed to enter public utilities provide public products and services, they also should enjoy the same tax preference. These tax incentives should be based on the legal basis of taxation, establish a scientific and reasonable compensation mechanism for tax incentives, and be reviewed through a fair competition.
Reconstruction of Tax Preference System of Public Enterprises in China
Journal of Shanghai University of Finance and Economics Vol. 19, Issue 01, pp. 103 - 116 (2017) DOI:10.16538/j.cnki.jsufe.2017.01.009
Cite this article
Ren Chao. Reconstruction of Tax Preference System of Public Enterprises in China[J]. Journal of Shanghai University of Finance and Economics, 2017, 19(1): 103–116.