China's Perspective On Game Of Taxation Between Multinational Corporation And Source County

The rise of the multinational corporation all over the world brings about challenges in many ways. As the main position that multinational corporations enter on a large scale, the state of income source starts an inevitable war of game of taxation without gunpowder with the multinational corporations on the problem of tax benefit. With the game of taxation as breaking point, the paper tries to discuss the particularity of the multinational corporation and the state of income source (especially China) as subjects in the game of taxation through the multi-dimensional analysis of the definition of the game of taxation and the clear defining of the game subjects and behaviors. It infers and compares the different profits of the two subjects when they choose different strategies in the game of taxation behaviors. At last, a conclusion is reached as follows: only by improving its own ability to acquire information, perfecting the taxation law, and tightening the collection and management can the state of income source keep the Nash equilibrium to its own advantage in the game of taxation against the national corporation. Then a win-win situation is constructed between the corporation and the state of income source. The paper puts forward some suggestions to imperfect the present foreign-related taxation system in the new situation. It is made up of the following four parts. I. The Defining and Multi-dimensional Analysis of the Definition of Game of Taxation According to the meaning of "game"defined in economics, the paper defines the game of taxation as follows: game of taxation refers to a series of problems on action strategy and strategy equilibrium which appear in the process during which the two taxation parties fight with each other based on the winnings and losses of the profits of taxation. In the game of taxation, the game relationship between the two parties can be viewed from three perspectives. First, in the market economy, both the government as subject of taxation (namely tax authorities at all levels) and the taxpayer as subject of paying taxes are inter-independent behavioral agents with their own interest. The government must obtain the tax revenue, and then the taxpayers have to pay taxes. The situation leads to the choice and conflict of interest, which results in the different behavioral orientations of their own. It is the internal motive and basis for the formation of the game of taxation between the two parties. Second, in the specific process of the game, the two parties of taxation have many behavioral ways and strategies to choose, and it is not emphasized that the taxpayer must pay taxes according to the law. It changes the stereotype that the taxation authority stands in the advantageous position in the traditional taxation relationship and puts more emphasis on the reciprocity, interaction and conditionality of the two sides. Third, from the result of the game of taxation, it can be seen that an equilibrium point must be found on which neither can the government increase any tax nor the taxpayer can take any measure to reduce the tax. As for the category analysis of the game of taxation, the paper holds the opinion that there are the zero game of taxation and the game, the non-symmetry information game, the dynamic game, the repetition game, the cooperation game in the ideal situation and the non-cooperation game in the real world. As for the multi-dimensional analysis of the game of taxation, the paper attempts to illustrate it in three levels. From the perspective of politics, on the one hand, the game of taxation must consider how the national government assures to maximize the economic interest of the whole country as the taxation subject; on the other hand, it must take it into consideration how the taxpayer cooperate with the government's behavior and strategy actively in order to the effective implementation of the tax policy. In the social layer, the game of taxation must pay attention to and deal with the conflict of interest between the specific interest individuals inside the two parties of taxation inorder to reach the equilibrium situation in which the different interest entities can communicate and interact with each other harmoniously. However, the layer of law is the emphasis o f the paper. From the angle of the relation between obligation and right, the relation between right and obligation in the game of taxation can be divided into taxation right and taxation obligation; from the perspective of the standard of right, it is mainly presented in the form of the taxation right and the right of the taxpayer. The interrelationship between the taxation right and the right of the taxpayer is: the taxation right belongs to the category of the public right, whereas the right of the taxpayer belongs to that of the private right; as far as the legal status, the right of the taxpayer should be above the taxation right and the latter should be submissive to the former; the taxpayer exercises his or her right in a proper and legal way, which reflects his or her own will, interest and freedom; the exercise of the taxation right should regard the right of the taxpayer as coordinate, it only represents the public interest of the whole nation and society rather than fused with the private interest of the specific taxation subject or of the taxation personnel; the right of the taxpayer can be inferred or widened, whereas it is not allowed that the taxation enriches its content or enlarges its explanations regardless of the law; it is hard for the right of the taxpayer to resist the taxation right, but the infringement of the latter to the former is very easy. Therefore, it requires us to form the monitor and restriction mechanism inside and outside through adjusting the taxation procedure regulation. II. The Subject in the Game of Taxation The chapter mainly introduces the special subjects of the game of taxation----the Multinational Corporation (Hereinafter MNC) and the state of income source. Although different people hold different opinions about the definition of the Multinational Corporation, all agree to the three standards-----the construction standard, the performance standard and the behavior standard. Compared with other kinds of corporations, themultinational corporation has the following features: the great economic power, the mature modern enterprise system, the reasonable management system, and the monopolized and internalized advantage. As for the definition of the state of income source, the paper tries to intensify the understanding through comparing such pairs of definitions as the state of income source and the native state of the MNC, and the state of income source and the jurisdiction of the area of source. As a state of income source, our nation is of such characteristics: the open economic policy, the great market potential, various preferential measures to encourage investments and comparatively low cost. III. The Behaviors in the Game of Taxation First, this part summarizes the developing process of the MNC in our country and a series of challenges that it brings about to the taxation concerning the foreign affairs in our country. Then combined with the two game models, it analyses the different responding strategies of the Multi Corporation and the state of income source in the process of game and at last the chapter arrives at the following conclusion: evading tax is a rational choice for the Multi Corporation to pursue the maximized individual profit in the present system; there is no clear legal defining on the definition and nature of tax evasion in the taxation system concerning foreign parties. Kinds of preferential measures in the taxation system concerning foreign parties are not only inconsistent with the national treatment principle but easy to lead the tax evasion of the MNC as well. The scope and depth of check and monitor are far from being enough. All the defects are waiting to be overcome. The paper does not make much theoretical argumentation on the problem of tax evasion and anti-tax evasion, but it provides the case analysis according to the specific conditions in our country. Through the illustration, the conclusion is got that the tax evasion phenomenon of the MNC in our country is universal and severe. In the detailed case analysis, the paper chooses the transferred pricing which makes up 60% of the total evaded tax for research on the practical layer. After reflecting the process of anti-tax invasion work in our country, a few effective measures are concluded: toattach importance to the exchange of taxation information, to introduce the advanced managerial information system, to strengthen the tracing management and to consolidate the anti-tax invasion effect. In 2004, the National Taxation Bureau issues "The Implementation Regulations of the Subscription Pricing in the Business among Associated Enterprises"(Trying out Period). The regulation introduces a new type of measure to fight against the tax avoidance in the form of transfer pricing, that is, the advance pricing agreement (APA). It has the following advantages: a comparatively great flexibility, optimizing the investment environment on the macro control layer, decreasing the taxation cost of the taxation department, exciting the taxpayer's activity, reducing the possibility to fail in collecting and collect less than enough. Some problems must be solved in the process of implementing the subscription pricing policy: to set up implementing rules as soon as possible, to improve the work efficiency of the tax department, to establish the credible information auxiliary system, to cultivate specialized and comprehensive tax professions as soon as possible, to make a close cooperation with the periphery departments, and to make it clear whether they are charged or not. IV. Suggestions to Strengthen the Foreign-related Tax Collection and Administration in Our Country The suggestions include: to perfect the foreign-related tax legislation, to intensify the international tax administrative authorities, to perfect the tax declaration system of multinational company, to focus on implementing investigation of the anti-tax avoidance in the form of transferring pricing. Make full use of tax contracts, to strengthen the cooperation and exchange of international taxation, to collect information widely, to establish the database of multinational taxpayers, and to cultivate the specialized professions for international tax administration.