Studies On Tax System For Transfer Pricing

With the internationalization and integration of the world's economy, multinational investment has become a common economic phenomenon. Accordingly the multinational companies, as sparkling stars in the process of the economic globalization, play important roles as the organizers of the world's production and grow rapidly with the globalization process. Nowadays these multinationals are becoming the core of the economic globalization. However, during this process the multinationals, with its advantages in production and sale across the countries, take advantage of the tax system difference among the countries and the loopholes existing in the foreign tax laws and international tax laws to avoid or reduce the tax burden by various legal means in their multinationals business operations for maximum profitability. In this case the international tax avoidance takes place where the most typical way of tax avoidance is Transfer Pricing ("TP") commonly used by the multinationals. Therefore, the countries are all working on the establishment of the tax system for TP to prevent the multinationals from conducting international tax avoidance by means of TP.With the continuous opening-up of China toward the outside world, especially after its entry into WTO, more and more multinationals will be coming to China for business operation as attracted by the huge potential market here. These foreign investment enterprises ("FIE"), on one hand, bring in advanced management experience, personnel and technology and makes up for the inadequate home investment capital; on the other hand, some FIEs aiming at the maximum profitability and the minimum tax burden, would seek for various illegal interests in an open way of TP. Most FIEs in China are the associated companies of the multinationals, which conduct large amount of commodities trading, exchanges of technology, labor and fund, with their parent companies or other associated companies, where the foreign investors might achieve the purpose by intentionally raising or lowering the prices or the standard to allocate the expenses. Such practice not only infringes the interests of the Chinese investors and causes the loss of tax revenue of our country, but also results in the unfair competition among the FIEs in China, produces the false image of a poor investment environment in China and further affects the normal exchange of the international economies. However, our tax system for TP officially determined in 1991 is still at the very initial stage thus inevitably has various defects. Therefore, it is an important subject in current tax system establishment in China to study the tax system for TP for the further completion of our TP tax system and the effective prevention of the foreign investors from tax avoidance by TP. The author selected < studies on tax system for TP> as subject of the thesis to conduct a systematic and in-depth study on the basic theories of TP, as well as the comparison and analysis of TP in various countries and the principles of OECD. On such basis, the author further analyzes the current tax system for TP in China by borrowing the successful experience abroad and combining the actual situation in china. Furthermore, the author puts forward improvement measures and suggestions on tax laws of preventingthe tax avoidance by TP and in regard to the tax collection administration, expecting the continuous perfection of the tax system for TP could benefit to eliminate the unfair tax issues in the international economic exchanges between the various countries of the world and China, thus the legal interests of the related countries are safeguarded to eventually promote the normal exchange of international economy. Made up of Introduction and seven chapters, the thesis totals 160,000 Chinese characters. Elaborated along the thoughts of Theoretical Analysis - International Practice - Analysis of Current Situation - Resolution and Suggestions, the thesis eventually focuses on strengthening China's tax system for TP to build up a complete set of tax system f...