A Study On Tax Planning Mechanism

Under the conditions of the market economy, research on the theoretical basis of tax planning holds imperative and practical significance for strengthening the governmental guidance and supervision of corporate tax planning, optimizing the tax planning mechanism, and giving a full play to the regulating function of tax for the macro economy.Tax planning is something relatively new in China and a realm still surrounded by controversy. Existing literature on tax planning is largely focused on the research of practical issues; theoretically, no systematic line of thoughts and methodology for the research has emerged, while in practice there is no unified guiding framework. The paper aims to build a highly integrated thinking framework– the tax planning mechanism, and, with formation, operation, evaluation and regulation of the tax planning, it attempts to probe the tax planning issue from multiple perspectives, including the government and enterprise win-win results. The purpose of this paper is to enrich China's tax planning theory, provide theoretical basis and reference for the reform of China's tax system, and guide enterprises to perform proper tax planning. This paper consists of two parts with eight chapters. Part I (Chapter II) present research on the basic theory of enterprise tax planning; Part II (Chapter III, IV, V, VI and VII), on the basis of Part I and with the formation, operation, evaluation and regulation of tax planning, analyzes tax planning mechanism and related issues.Chapter I ,Overview. This chapter presents the subject of this paper, summarizes domestic and foreign literature on tax planning, introduces the line of thoughts for the research, and elaborates on the paper's structure, research methods and innovations.Chapter II ,Analysis of the Basic Theory of Tax Planning. This chapter applies relevant economics theories to analyze the tax principle, legal principle, game, contract and sociology of tax planning, and puts forward the ideas for building the framework for the tax planning mechanism.Chapter III ,Formative Mechanism of Tax Planning. This paper discusses the motives and major objectives of tax planning by enterprises and analyzes the relationship between tax environment and tax planning from the perspective of the economic man.Chapter IV ,Operating Mechanism for Tax Planning. This chapter investigates the operating methods of the tax mechanism in terms of enterprise financing, investment and operating processes.Chapter V, Evaluation Mechanism for Tax Planning. This chapter applies risk measurements and cost measurements to evaluate the effects of enterprise tax planning and tentatively puts proposes building a performance evaluation system for enterprise tax planning.Chapter VI, Internal Control Mechanism for Tax Planning. Starting with the enterprise internal governance structure, this chapter analyzes internal control means and methods used by enterprises in performing tax planning.Chapter VII ,External Control Mechanism for Tax Planning. This paper investigates the external control mechanism for enterprise tax planning in terms of the legal environment, tax accounting, and government regulation, analyzes the major weaknesses found in the current governmental tax collection and administration in China, and presents ideas for improving and optimizing China's tax collection and administration efficiency.Chapter VIII Conclusions, Limitations and Subsequent Research Direction This paper attempts to achieve innovations in the following areas:1. It proposes to build a highly integrated thinking framework, i.e., the framework for the tax planning mechanism, and then uses this framework as the starting point, basis and main thread of this paper; this framework is conducive to an overall investigation of how tax planning affects the government's tax policies and impacts on enterprises'economic behaviors.2. It analyzes the tax planning issue under the corporate governance structure and discusses the importance of the tax environment for tax planning. This paper conducts a rather comprehensive discussion of the framework of the tax planning mechanism in four aspects– the formation, operation, evaluation and control of tax planning.3. The foothold of the research described in this paper is the government and enterprises. This paper attempts to depart from the unilateral foothold of conventional research (generally either the government or enterprises) in order to come with a comprehensive and systematic interpretation of the tax planning issue; on this basis, the paper presents ideas for building and improving China's tax planning mechanism, which holds considerable practical significance for improving China's tax system.