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Yi Zheng

Date of Award


Author's School

School of Law

Degree Name

Doctor of Juridical Science (SJD)

Degree Type



As the outcome of exploding international trade since the 20th century, foreign tax credit was enacted as a method to coordinate resident and territorial tax jurisdictions. Two inherent principles should be embodied. Relieving international double taxation is the foremost purpose as well as principle, and defeating tax escaping, protecting resident country’s tax base is the other one. Three aspects are viewed as criteria to evaluate international taxation policy traditionally. They are fairness, efficiency and administrative simplicity. However, it’s doubtable whether these three criteria are coherent with each other firstly, and, it’s commonly recognized that achieving the three concurrently is subjective and theoretical. Rather, designing the FTC system based on the resident country’s realities and requirements is a more appropriate approach. US is the first country in the world to adopt the foreign tax credit system to relief international double taxation. After almost a century of application, the FTC system in US has received increasing criticisms for the too generous results to taxpayers but huge fiscal losses to the country. China, as another one of the limited countries adopt the FTC system, enacted the rules in 2008 and strictly prescribed every aspect of the FTC system. China is transferring to a capital exporter now, and its national policies explicitly encourage Chinese enterprises to develop oversea businesses. Under this circumstance, the FTC system in China is defective in two facets: the function of relieving international double taxation is weak and it lacks specific details to deal with practical matters. Both the US and China adopt the FTC system, while they effect in an opposite way. Despite the US rules are criticized, they provide valuable experiences for China. Foreign tax credit rules don’t have the “good or bad” distinctions, the results highly depend on the economic environment which they apply to and the synergy with other closely related rules in a whole international taxation regime. Reforming the FTC in China should proceed from realities, leading to a liberal approach that revises the current national revenue inclination; in the meanwhile, establish related rules from a holistic perspective, constituting an integrated regime together with FTC system, in order to protect Chinese tax base and defeat tax avoidance.

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