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Regulation Of Tax Avoidance By Multinational Corporations

Posted on:2006-11-11Degree:MasterType:Thesis
Country:ChinaCandidate:M J LiFull Text:PDF
GTID:2166360182457055Subject:Law
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This article discusses the law regulation of tax avoidance by multinational corporations in three parts. In the first part, the article makes a brief introduction about the law regulation to multinational corporations in four sections. At first, from their legal status, it points out multinational corporations themselves have no nationalities. In essence, they are combinations of corporate body which have legal status independently in their own countries. And no country has the right to make a set of law systematically to regulate multinational corporations as a whole. Therefore, the problems aroused by multinational economic activities can only be solved by making related regulations in domestic law, with the blinding of certain international treaties and collaboration between countries. Then the following section emphatically makes a lawful explanation to the concept of tax avoidance, about which opinions are widely divided. In its explanation, it poses that the economic acts of tax avoidance, which don't break the law in form but violate the original purpose of legislators in essence, should be adjusted. The section also makes thorough comparison between tax avoidance and tax evasion to illuminate the characteristics of tax avoidance. Then through the introduction of two different attitudes toward tax avoidance in different countries, the author particularly puts forward the view that the act of tax avoidance is one of the revocable juristic acts, and also gives the legal arguments and inferences to the view. In the next section, using the method of positive research and induction in law, the author analyzes the major modes of tax avoidance taken by multinational corporations. Multinational corporations shield tax mainly through the transnational shift of tax payer and the shift of tax object. The author elaborates the way in which multinational corporations shield tax by the transnational shift of tax object. The author not only analyzes the mode of transfer price, the common way of tax avoidance at present, but also gives special cases to explore how multinational corporations take other ways to shield tax, such as thin capitalization, abusing tax treaty, taking advantages of tax heaven to set up base corporations, e.t.c. among which the section makes an amplification to the ways of tax avoidance taken by the transnational tax payers in China. It explains the concealment of thin capitalization that multinational investors achieved by using loan replacing equity investment, and illustrates how to achieve tax avoidance through abusing tax treaty and the exact total number of tax avoidance. In the last section of the first part, the author analyzes the reason why multinational corporations shield tax in the perspectives of subject and object. Theoretically speaking, like other laws, the tax law cannot standardize every aspect of changeable economic life, thus it is hard to avoid the omissions and lags in law, which makes tax avoidance possible; owing to several objective factors, for example, different structures of tax systems in different countries, the existence of international tax heaven, the carried content of tax treaties, the possibility of tax avoidance of multinational corporations becomes true, thus it is derived that tax avoidance in reality produce negative influence to the country's economic interests and the normal flows of international capital. Here the author analyzes the harmfulness mostly with the views in economics. The second part of this article discusses the legal principles should be obeyed and the specific legal measures should be taken when regulations are made to tax avoidance of multinational corporations. The leading legal principles should be obeyed are the principle of legalism of tax revenue and the principle of keeping taxation fair. Four more concrete principles are divided according to the principle of legalism of tax revenue. The main purpose of emphasizing the legal regulation on tax avoidance is to limit the power of the tax executors so as not to misuse their authorities and lead into unfair to tax payers with the excuse of realizing fair play of tax payers. And for the principle of keeping taxation fair, the principle of content having priority to form and the principle of normal trade are stressed, which are the fundamental and most important international guidance principles for the control of tax avoidance. In the second part, using the method of enumeration and antitheses, the author analyzes the legal measures against tax avoidance in each country, and how the two aspects of unilateral regulation and international harmonization control the varied ways of tax avoidance. In the unilateral regulation, influential related law items of every country are enumerated, such as, in French the double standard is used to identify the residence; in Britain base corporations are prevented to set up by the sanction of laws; thin capitalization is restricted and criteria are used to clarify the proportion of shareholder loans, and so on and so force. And in the aspect of international harmonization, the article enumerates related conventions and treaties among countries. The importance of setting up informationexchanging system is emphasized, because the more comprehensive and specific the information is, the more convenient for the tax administration to make their adjustment fair and reasonable. In this part, cases are used from aspects of domestic laws and international laws to introduce the relief measures against the abuse of tax treaties in each country, for example, the case that Aiken Industrial Company charged the tax administration, and the specific methods to prevent tax payers from a third country to abuse tax treaties. And the article also introduces the effects, the advantages and disadvantages of those methods. In the third part of the article, the author briefly illustrate the development of anti-avoidance work in China and related measures in the current anti-avoidance laws and rules, including defining the affiliated enterprises and choosing the adjustment methods. And the materials of producing evidence and duty of producing evidence are discussed. The part focuses on the attribution of obligation of producing evidence, which points out that it is reasonable for tax payers to produce evidence. Exposing the shortages of anti-avoidance in present china, the article puts forward its legal adjustment measures, especially the issue of raising the level of the legislation of anti-avoidance law. It suggests adding anti-avoidance business to the next income tax return law as a special chapter, taking the Regulations of Tax Administration on Business Transactions between Affiliated Enterprises as a model and putting the five parts into a chapter. In this part, the focus is to demonstrate the feasibility and advantages of the Advanced Pricing Agreement both in theoretically and practically. The APA can combine the principle of legalism of tax revenue and the principle of keeping taxation fair together efficiently, which embodies the unification of justice and efficiency in a higher level, and represents that the standard of administration power is leaning to the standard of tax payers'right. In this part, the author also poses the idea that how to use the principles of case law for reference and bring it into effect in the anti-avoidance work in our country, so as to expands the diversity and validity of anti-avoidance work in practice. At the end of the article, the author mentions that in order to improve the quality of anti-avoidance work, international cooperation must be strengthened and information should be tried to collect and exchange. The article further discusses the solutions to disputes caused by tax avoidance.
Keywords/Search Tags:Multinational
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