On Legal Counteracting Measures Against International Tax Avoidance Engaged By Base Company

With the current trend of economic globalization and investment liberalization, international investment competition becomes more and more intensive. In order to succeed in competition, multinational investors regarding maximization of after-tax profit as their ultimate target try hard to make international tax planning, among which the use of base company established in tax havens to engage in transnational tax avoidance is the best choice of many multinational taxpayers. At the same time, in order to attract foreign capital, each country in the world offers competitively many preferential tax measures so as to improve investment environment of its own. Especially, under the premise that tax havens offer special preferential tax regimes, tax havens take other measures which can help multinational taxpayers to avoid tax using base company established in tax havens, which will further distort international investment, result in abnormal flow of multinational capital, and erode the tax bases of relevant countries heavily. Therefore, how to restrict the misuse of tax havens by multinational taxpayers has become the problem of great concern of each country. To deal with it, in the 1960's, the United States first enacted Subpart F of 《Internal Revenue Code》to keep a tight rein on the abuse of tax havens by multinational taxpayers. Followed by developed countries mentioned above, developing countries have promulgated relevant laws and regulations against international tax avoidance engaged by base company and adopted anti-haven tax regime; at the same time international organizations led by Organization for Economic Co-Operation and Development (OECD) also launched the campaign aiming at counteracting harmful tax competition, which will devastate international tax avoidance engaged by base company fundamentally.With the steady development of reform and opening to the outside world in China, we have made much progress in attracting foreign capital on the one hand and investing abroad on the other hand. Moreover, overseas investors of our country have established numerous enterprises in some universally recognized tax havens, not to say multinational investors to our country. Being a member of WTO, we will gradually relax foreign exchange control over domestic enterprises, although the tax law of our country imposes certain restriction on deferral of taxation, there is still some room left for overseas investors to avoid tax by using base company, which will erode the tax base of our country seriously. In my opinion, our country should further improve transfer pricing rules and enact CFC legislation based on current situation of our country and learned from the successful experiences of CFC legislation adopted by the developed countries so as to safeguard fiscal revenues of our country. This article studies the legal counteracting measures against international tax avoidance engaged by base company, it analyzes deeply the concrete mechanisms against international tax avoidance engaged by base company inbound and outbound by using such legal empirical methods as analysis, comparison and induction, finally, it deals with present situation of legal control over international tax avoidance engaged by base company, and gives some constructive suggestions regarding how to further improve foreign tax legislation of our country. This article is divided into four chapters, containing about 45,000 Chinese characters. The main contents of each chapter are as follows:Chapter I deals with the general introduction of international tax avoidance engaged by base company. It first analyzes the definition of base company, thoroughly studies the behaviors of international tax avoidance engaged by base company, and points out the necessity to restrict it through analyzing the advantages and disadvantages of international tax avoidance engaged by base company, it also briefly gives an introduction of the present situation of control in the world.Chapter II deals with domestic legal counteracting measures against intern...