Journal of
Accounting and Taxation

  • Abbreviation: J. Account. Taxation
  • Language: English
  • ISSN: 2141-6664
  • DOI: 10.5897/JAT
  • Start Year: 2009
  • Published Articles: 206

Full Length Research Paper

Do the changes in tax incentives encourage direct investment in China by Taiwanese enterprises?

Wan-Ying Lin
  • Wan-Ying Lin
  • Department of Accounting, National Chengchi University, Taiwan.
  • Google Scholar
Jui-Chih Wang
  • Jui-Chih Wang
  • Department of Accounting Information, National Taipei Business University, No.321, Sec.1, Jinan Rd., Zhongzhen District, Taipei City 100, Taiwan.
  • Google Scholar

  •  Received: 21 May 2014
  •  Accepted: 25 September 2014
  •  Published: 30 September 2014


This study examined the association between tax incentives of China’s 2008 Enterprise Income Tax Law (the 2008 tax law) and inflows of foreign direct investments from Taiwanese enterprises (TDI) to China. In addition, this study also investigated the effects of industry and location on TDI. This study showed that reduced tax rate concessions for foreign enterprises and increased tax rate considerably reduced TDI inflow to China. Furthermore, industry-specific tax incentives became more favorable than location-specific tax incentives after the new tax laws were introduced. The results of joint tests of tax reform and tax incentives indicated that the 2008 tax law did not provide location-specific tax incentives for TDI, while industry-specific tax incentives appeared to be more attractive to TDI. Moreover, Taiwanese enterprises with intensive indirect investment in China as well as with higher shareholdings were inclined to have higher TDI. The implications of these findings implied that foreign direct investment strategy in accordance with industry-specific and location-specific tax incentives can enhance the competitive advantages of multinational companies.


Key words: Tax incentives, the 2008 tax law, Taiwanese direct investment (TDI).