Abstract: Traditional international tax competition theory reveals the economic effects of different tax burden among regions on capital and labor, while ignores the influence of commodity tax, revenue structure of government, and political mechanism. International tax competition impacts on mobility of productive factor, view of social members on taxation, sets a constraint on government in dominating social resources, and makes social members more sensitive to rationality and efficiency of fiscal expenditure in modern state governance. Reducing burden of income tax as well as commodity tax rates, transforming the approach of tax establishment, improving visibility of taxation and transparency of fiscal expenditure, promoting budget reform and intergovernmental fiscal system to increase the efficiency of fiscal expenditure, and preventing the expansion of non-tax revenue to offset the effect of tax reduction will contribute to China’s development in international competition.