In China, the current income tax levied to the Domestic-Funded Enterprises enterprise is Provisional Regulations of the People's Republic of China On Enterprises Income Tax , promulgated by the State Council on Jan 1st,1994, which applies to the State-owned Enterprises, Collectively Owned Enterprises and Private Enterprises ;while the income tax levied to the Chinese Enterprises with Foreign Investment and foreign invested enterprises and foreign enterprises by setting up establishment or having income from China is Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises and the detailed rules and regulations. Thus, there are two different income tax systems of the Domestic-Funded Enterprises and the Foreign-funded Enterprises with the different taxpayers, object of taxation ,rate of tax , the count of the taxable income and the tax Preferential policies. However, not only from the point view of the practice and the theory, it is necessary to cancel the two different income taxes but unify income tax on the Domestic-Funded Enterprises and the Foreign-funded Enterprises.

       Theoretically, the two different tax systems granted for the Domestic-Funded Enterprises and the Foreign-funded Enterprises goes against the national treatment, the world trade organization rules and the direction and tide of the current taxation reform around the world. The national treatment is also called nondiscrimination treatment, which is the basic principle in WTO, and the essential of which is nondiscrimination principle. On the one hand, it requires that the taxation treatment enjoyed by the foreign enterprises is not lower than the national residents, and on the other hand, not higher than the national residents in any way. But now, both the non-national treatment and the super national treatment of taxation exist in China.

       The two different taxation systems are against the tax principles including equality principle of taxation and the efficiency principle of taxation. Income Tax Law for Enterprises with Foreign Investment and Foreign Enterprises has regulated that the foreign-enterprises enjoy a great deal of tax preferential policies such as 2 years’ tax-free ,3 years’ half tax and the tax reimbursement if invested again and so on. According to the status, the actual burden of taxation for the domestic-enterprises is about 25%, which is much higher than the 15% burden of taxation for the foreign-enterprises. That is quite unfair for the domestic-enterprises especially after China has entered WTO and foreign capital shall come into China, which will leave the national domestic-enterprises in unequal competitive environment, place the domestic-enterprises at a disadvantage at home and abroad which shall go against the fair competition among all kinds of enterprises and further more it shall have a strong impact on the survive and development of the domestic-enterprises and the national industries.

       Efficiency principle of taxation requires that with the minimal expense to get the maximal tax revenue together with the economic control to promote economic development or lighten the hindrance of the taxation to economic development. The administrative efficiency principle of taxation mainly covers the taxation expenses and the expense of paying tax, which require that the tax authorities to pay more attention on the administrative efficiency to save the expense of taxation including saving the expense of taxation from the tax authorities and the declaration expense of paying tax from the tax payers. With the two different systems, the national tax authorities and the local tax authorities separately levy the same tax which increase the levying expense and enlarge the friction and the paradox between the authorities lowing the efficiency of levying tax.

       The economic efficiency principle of taxation means through optimizing the tax system to reduce the ill effect of the taxation on economy, or promote the smooth development of economy. However, the two different tax systems bring on lots of tax preferences, and the different tax treatment goes against the neutral principle of taxation, contort the market economy and affect the running efficiency of market economy and the resource allocation.

       Practically, the two different income tax systems for different enterprise bring a great deal of trouble to the taxing authorities and the tax payers, and because of the complex basis of tax assessment it is easy to miss out the tax causing the loss of the tax revenue. Due to the high rate of tax, in fact, to dodge the tax some enterprises put a large sum of money on account in the form of public accumulation fund for housing construction to enlarge the expense and reduce the payable tax, however this sum of money is never given to the workers unless the workers buy the house, otherwise this money will be the capital freely dealt with by the enterprises by investing on the reproduction round and round. Thus ,the high rate of tax for the domestic-enterprises increase the possibility to lodge the tax which is harmful for the adjusting the tax and the development of national economy。The different tax treatment on the domestic-enterprise and the foreign-enterprise makes the enterprises always compare with each other to ask for more tax preference. Together with the shared tax between the central government and the local government and the effect of the interest and regional protectionism, some places broaden the tax preference and reduce the tax freely to attract more foreign capital, which is really a big problem for over tax preference and the loss of taxation revenue.

       Furthermore, many people thought that it is because the tax preference that attracts the foreign capital, however, it is not wholly because of the tax preference but because of Chinese large market and the low producing cost. We thought we provide the tax preference to the foreign-enterprise and they will get those preferences ,but they actually can not get .Take the America tax system for example ,it implements the resident(citizen)jurisdiction and the source jurisdiction ,which means that the foreigner shall pay the tax preference bake to the American government .thus ,it is obvious providing the tax preference does not mean the foreign-enterprise can enjoy.

       Whether the transnational investors can enjoy the tax preference or not depends on whether the capital-importing country can implement tax sparing. If there exist the tax spring system, the tax preference shall belong to the investors otherwise it shall belong to the capital-exporting country. Although there are more than 100 countries has implemented the tax spring systems but there are still many countries did not implement including some developed countries like America. As the biggest capital-exporting country to China, America did not recognize the tax spring from China, which means that the tax preference we provided to the foreign-enterprise did not leave the foreign-enterprise to enjoy the direct gain but leave for the capital-exporting country.

        In conclusion, unifying the domestic-enterprise and foreign-enterprise is the irresistible tide whether theoretically or practically.