Revise Applying a social psychology model, the paper examines the determinants of tax evasion and avoidance in emerging markets, specifically in China. The paper asks two questions. What are the factors which give rise to firms' tax evasion and avoidance behaviors under post-planning economies like China? What lessons can China learn from its own experience and what can other countries, who are under going similar process, learn from China? Analyzing cases and survey results, the paper argues that instead of granting fiscal incentives preferential to foreign direct investment, efforts should be turned to eliminate distortions, discretions, and confusions. It suggests that allowing equal competition for inward foreign direct investment will create a more transparent, consistent, and stable environment for attracting foreign investments. Its findings and analytical framework will have important implications for government policies and for firms doing business in these countries