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Research On Regulation Of Taxation Evasion Based On Thin Capitalization For Transnational Enterprise

Posted on:2012-04-16Degree:MasterType:Thesis
Country:ChinaCandidate:Y P ZhangFull Text:PDF
GTID:2166330335457953Subject:International Law
Abstract/Summary:PDF Full Text Request
Since the promulgation and implement of the new"Enterprise Income Tax Law", thin capitalization has been stipulated expressly in China, however, as a new rule, it is not perfect. Therefore, basing on the analysis of fundamental issues and introduction to other countries'rules, this thesis aims to sort out current rule of thin capitalization in China, discuss its defects and propose certain suggestions to perfect the rule, so as to safeguard China's tax yield. This paper is divided into three chapters.The first chapter analyzes fundamental issues of thin capitalization in three aspects. First of all, it defines the concept of thin capitalization, and affirms that with MM theory as its theoretical basis, thin capitalization is one method of international tax avoidance by means of changing enterprises'capital structure unreasonably and artificially. Then in the second aspect, it analyzes why thin capitalization generates. Transnational enterprises favor thin capitalization, because of the tax deduction effect of interest, its concealed character for tax avoidance as well as operational advantages of financing by loans. In the final aspect, it discusses the impact of thin capitalization, that is, it does not only infringe upon host country's tax yield and negatively affect host country's investment environment, but also bring about unfair competition among enterprises and harm other creditor's interests. The second chapter compares thin capitalization rule in terms of international legislation. It first analyzes current methods for thin capitalization regulation, such as"irregularity"approach, fixed ratio approach and arm's length approach, and later, it briefly presents thin capitalization rules of major countries all over the world.The third Chapter first sorts out thin capitalization rules in China, and concludes that with regard to thin capitalization regulation, China's tax system adopts mainly the fixed ratio approach with arm's length approach as a subsidiary, besides, rules on related parties, debt investment and equity investment have all been clearly and specifically stipulated in China. Then it analyzes flaws of China's current thin capitalization tax system from aspects of both substantive and procedural rules, and further proposes suggestions for perfection. That is, in respect of substantive rule, China shall regulate thin capitalization tax system legally and systematically, and make improvement in specific institution deign, while in respect of procedural rule, China shall perfect its prior reporting system, take the establishment of a special international tax avoidance institute into account, enhance tax staffs'quality and strengthen international cooperation as well as cooperation with accounting firms and banks.
Keywords/Search Tags:Thin capitalization, International tax avoidance, Fixed ratio approach
PDF Full Text Request
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