Research On Multinational Tax Avoidance In China

Along with the continuous development of globalization and integration of economy, multinational corporations have become the most dazzling star in the economic world arena. However, while multinational corporations are pushing world economy forward, they are also making full use of their advantages to avoid taxes with various means in order that they could realize the maximization of global interests, which ultimately generates a serious of negative effects, such as infringing national tax sovereignty and undermining fair competition of taxation. Currently, the governments of the world have regarded making rules for multinational tax avoidance as the most important issue with respect of international taxation.The study of the regulation of multinational tax avoidance originated from the Western developed countries, and after nearly a hundred years of history, it has achieved fruitful results and shared by the world. China joined in the study of it in the end of1970s. After the continuous exploration and research for more than thirty years, China has been gradually got line with international rules and achieved initial success in all respects. However, due to the relatively short history and the limitations politics, economy and laws, China is still lack of systematic, scientific, relevant and practical experience in making tax regulation for the avoidance behavior of multinational corporations.Thus, it is important to have an in-depth study on multinational tax avoiding behavior and give referential suggestions combined with China’s practice. By means of normative and empirical analysis, historical and comparative analysis, theoretical research and case analysis, the author studies the phenomenon, ways and influencing factors and the effect generated with tax avoidance making by multinational corporations in China. Meanwhile, she deeply analyzes the shortcomings in tax regulation in China, and on the basis of comparison and learning the advanced experience from foreign countries, puts forwards the optimal path for making rules for multinational tax avoidance.The author changed the ways of focusing on the traditional tax avoidance of price transferring while ignoring other tax avoidance, focusing on the study of intangible assets while ignoring that of tangible assets. In view of the characteristics of diversity, complexity and flexibility of the ways of tax avoidance exploited by multinational corporations in China, and combining with cases in work, the author explores and studies all the ways of tax avoidance. At the same time, the author puts the idea of "systematic management, bring it under control both internal and external" into this study. The paper takes the phenomenon of the loss of tax revenue as the entrance point, then make use of various research methods, along with the idea of "analyzing the objective existence of tax avoidance-resolving the various means of tax avoidance-analyzing the effect of influencing factors of tax avoidance-referring the experience of international tax regulation-optimizing the tax regulatory path ", to explore and study gradually and systematically, also from outside to inside, from the reason to the result.The paper is divided into the following six chapters:Chapter1"Introduction". In this chapter, by taking the loss of tax revenue caused by multinationals avoidance as the entrance point, the author clarifies the purpose and significance of choosing this topic. And then, by sorting out and summarizing the research results both home and abroad, based upon previous studies, this chapter brings forward the means of the research and the structure of the paper, as well as innovation and shortfalls.Chapter2,"Reality examination of multinational tax avoidance in China". This chapter is a reality investigation of the objective existence of tax avoidance by multinational corporations in China, which includes three parts. The first part is the definition of the related concepts with multinational tax avoidance, and the purpose of it is to carry out the research within a unified and clear definition and scope and avoid the disputes which might have arisen from the research on objects differently defined and would have affected the study. The second part is the analysis of economic theory of avoiding taxes in multinational corporations.The third part is the analysis of motives of avoiding taxes in multinational corporations. Motives are closely related to the behavior and objectives of enterprises. Only with a profound research into the motive of an enterprise with avoiding taxes could we more clearly and thoroughly analyze the behaviors of tax avoidance. Thus, the research into the motives of tax avoidance can not be ignored. The fourth part is a reality investigation of the objective existence of tax avoidance with multinational corporations in China. This paper analyses it from the perspectives of investment in China, internal trade, business performance.Chapter3,"Analysis of ways of multinational tax avoidance in China". This chapter gives a detailed analysis on the ways of tax avoidance, from the traditional way of price transferring to the gradual rise of weakening capitalization, controlled by foreign enterprises and cost-sharing agreement. Among which, there are both theoretical analysis and classical case study. The organic combination of theory and practice will contribute to a thorough analysis of multinational tax avoidance.Chapter4," Empirical analysis on the factors influencing multinational tax avoidance in China." This chapter is a comprehensive analysis on the influencing factors in multinational tax avoidance in China. On the basis of theoretical analysis, the author establishes an assumption of empirical analysis, and through the collected data and making use of empirical analysis, she makes examination and complement to the conclusions of theoretical analysis. This chapter focuses on the impact of factors, such as the size of businesses, profit margin, amount of loss, the R&D expenditure, the ratio of fixed assets and intangible assets and debt ratio, etc. on the corporation’s behavior of paying tax.Chapter5,"The effect analysis of multinational tax avoidance by in China". This chapter comprehensively analyses the various effects of multinational tax avoidance mainly from the angles of income, economy and law, etc. It includes four parts. Part One is the effect of revenue. First, it is the effect of tax revenue. Multinational tax avoidance has both caused a huge loss of tax sources and increased the tax cost in China. Apart from this, tax avoidance behavior, despite repeatedly prohibited, also has a bad demonstration effect. Second, it is the effect of revenue chosen by enterprises. It makes the analysis from the point of view of enterprises. Generally speaking, tax avoidance produces positive effects on the supply of production factors, capital operation and investment. In addition, it is also generated deteriorating effect in the international balance of payments. Part Two is the effect of economy. It makes the analysis mainly from the aspects of distribution and allocation of resources. Part Three is the effect of law. It analyzes the impact of multinational tax avoidance to tax law system from both positive and negative aspects. The positive impact is that, multinational tax avoidance has provided basis for our tax system, and the negative impact is that, multinationals tax avoidance has seriously damaged the authority of our tax laws. Part Four is the other effects. First, the multinational tax avoidance seriously infringes on the interests of Chinese investors. Second, multinational tax avoidance affects the effect of tax incentives.Chapter6,"Tax administration on multinational tax avoidance in China". This part is the focus and the core of this paper. It consists of three parts. The first part is the tax management practices of multinational corporations in China. It comprehensively analyzes the historical development, achievements and the existing limitations of anti-tax avoidance in China, it aims at enabling us to more clearly understand the current realities of China’s anti-avoidance tax administration and laying a good foundation for making correct decision later discussed in the paper. Part2is the International comparison and reference of tax avoidance administration. The research on tax avoidance administration in developed tax is much earlier than China, and it has formed a complete theoretical system as well as a rigorous and effective monitoring mechanism. By introducing, comparing and evaluating the corresponding system and measures in tax avoidance administration making by developed countries, the purpose of this chapter is to summarize the existing common points refined and the mature experience and provides scientific and effective reference and inspiration for making tax regulations in the future. Part Three is the countermeasures and suggestions for perfecting tax management with multinational tax avoidance. Through a comprehensive and systematic analysis, and combining with the reaiity of our country, it brings forward the targeted and realistic countermeasures and suggestions which may effectively regulate the behaviors of tax avoidance with multinational corporations in China, that is, to construct a scientific and perfect anti-avoidance system, create an efficient and ordered anti-avoidance management system, and promote the coordination and cooperation of both domestic and foreign taxation.