On Foreign-Funded Enterprises' Transfer Pricing For Tax Avoidance In China And Measures Against It

In the process of the economic globalization, the multinational companies play important roles as the organizers of the world's production.During this process the multinationals, with its advantages in production and sale across the countries, take advantage of the tax system difference among the countries and the loopholes existing in the foreign tax laws to avoid or reduce the tax burden by various legal means in their multinationals business operations for maximum profitability.In this case, the most typical way of tax avoidance is Transfer Pricing ("TP").Therefore, the countries are all working on the establishment of the tax system for TP to prevent the multinationals from conducting international tax avoidance by means of TP.With the continuous opening-up of China toward the outside world, more and more foreign-funded enterprises have come to China for business operation.They, on one hand, bring in advanced management experience, personnel and technology and makes up for the inadequate home investment capital; on the other hand, some of them aiming at the maximum profitability and the minimum tax burden, would seek for various illegal interests in an open way of TP.Such practice not only infringes the interests of the Chinese investors but also causes the loss of tax revenue of our country.Our tax system for TP officially determined in 1991 is still at the initial stage.Therefore, it is an important subject in current tax system establishment in China to study the tax system for TP for the further completion of our TP tax system and the effective prevention of the foreign investors from tax avoidance by TP.Made up of Introduction and five chapters, the thesis elaborated along the thoughts of Theoretical Review– Analysis of Current Situation– International Practice– Resolution and Suggestions.Chapter One, A complete and in-depth elaboration is conducted over the basic theories of TP in regard to its meaning, basic theory, and the fact how the multinationals would avoid tax internationally by means of TP, etc.Chapter Two, The TP status quo of foreign-funded enterprises is analyzed qualitatively and quantitatively.Chapter Three, Related in detail China TP tax system's development process and the central content, and carried on the analysis to its operating efficiency low reason.Chapter Four, In accordance with the basic theories of the tax system for TP, comparison is made among the tax systems for TP in the countries, for the reference of China in its process of establishing such tax system.Chapter Five, to be specific, measures should be taken in four aspects, which are respectively to complete the legislation on tax system for TP, strengthen the levy administration of tax revenue, promote APA and improve the international cooperation and coordination.Meanwhile, specific solutions and suggestions are also raised in the four aspects.