Multinational Companies In China, Transfer Pricing And Customs Supervision

Since the 2008 financial crisis, China has highlighted the position in the global economy, the absorption of foreign capital momentum remained strong. In order to further explore and occupy the Chinese market in competition, maintain and expand advantage, the multinational companies, with its global procurement, production and sales of favorable position, taking advantage of the tax system differences between countries and the lack of our foreign tax regulations, carry out transfer pricing between the related parties in the trade activities crossing borders to achieve the benefit maximization worldwide.By analyzing the behavior system of multinational companies abusing transfer pricing to escape customs tax, it is found that generally, there is the highest possibility for wholly foreign-owned enterprise to misuse transfer pricing misuse on the skill-intensive goods in general trading conditions. Moreover, whether through the transfer of commodities, equipment, labor services, financing or intangible assets, in order to enhance its competitiveness, the transnational corporations can all implement the inside trading to lower transaction costs,. Multinational companies abusing transfer pricing led directly to excise tax reduction, infringing upon the fair and reasonable tax principle and destroyed industry fair competition environment.To prevent the loss of tax revenues resulted from transnational company's transfer pricing, the customs need to be clear about its insufficiency, strengthen the research and perfect the regulation eventually. The paper firstly summarizes the current situation and the problems in multinational company's transfer pricing of customs supervision, and go deep into the root of the problem. Secondly, by way of comparative studies with transfer pricing regulations of OECD and that of the WTO, prove that there is a basis of coordination between the Guidelines and the Agreement. And the Guidelines' detailed regulations about comparability's analysis and pricing method can provide the Agreement proper supplement, which could form the foundation for China's customs in transfer pricing legislation. The paper also goes through the administrative system and experience of the western developed countries and China's tax authority which is law enforcement department in taxation like customs, and interprets their means and methods of absorption of the Agreement and the Guidelines. Finally, on the basis of refining and summarizes lawmaking techniques and management experience which are worthy of customs to use for reference, the paper proposes to transfer pricing regulatory suggestions.