This paper examines the role of tax policy in China's economic, social and legal development. With respect to economic development, the author examines the use of tax incentives in attracting foreign direct investment to China and assesses its impact on the development of China's market economy. In terms of social development, the author critically assesses the limited role of taxation in reducing disparities in social income and in promoting social policies. While the relationship between legal development and tax policy may not be as obvious, the author makes the case that tax policy has had a positive impact on the development rule-by-law in China. While China has never experienced a western style rule of law, Chinese tax laws are similar to western tax laws in terms of substantive and procedural rules. The author notes the possibility that a well-developed tax system may be the impetus for the development of rule of law in China.