Research Of Multinational Corporations' Transfer Pricing And China's Restrictive Measure

Multinational corporation is a kind of enterprise pattern which possesses special legal and organizational structure . In recent years, the proportion of intrafirm trade of the multinational corporation in world trade has been increasing, which has attracted peoples' attention. The internalization theory says, the main reason why multinational corporation set up intrafirn market and undertake intrafirm trade is to save transaction cost. But their activities tell us, for the purpose of tax avoidance, they handle transfer pricing in intrafirm market. It is also an important reason why they set up intrafirm market. Aiming at multinational corporations' tax avoidance, many international economic organizations and main countries have formulated some laws, policies and measures relative to anti-tax avoidance. Put another way, the Game between the multinational corporations and the host counties has never stopped referring to the problem of tax avoidance and anti-tax avoidance. As the multinational corporations' means of tax avoidance have been renewing , the host countries" measures of anti-tax avoidance have been perfecting.China is also a victim country which has suffered from multinational corporations' tax avoidance by means of transfer pricing. Each year, our country's tax losses reach hundreds of billions because of transfer pricing. A great many of multinational corporations implement transfer pricing in China in the form of "import at a high price, export at a low price", which has caused the misleading appearance that more than half of the FDI enterprises have operated at deficit in China. It affects the implement of our foreign capital utilization policy and also induces "false foreign investment". The occurrence of this phenomenon has direct relationship with our inefficient supervise over levying taxes on FDI enterprises. If we research into this phenomenon by means of "the Game theory" we can find that, according to our present "only compensate, no punishment" policy, the multinational corporations' tax...