Study On The Issue Of China’s Thin Capitalization Anti-tax Avoidance

As economic integration is the inevitable trend of the current world, internationalcapital flow is not only the reflection, but the important driving force as well. Alongwith the international capital flow, international tax avoidance behavior of enterprisesare also increasingly prominent. There are three main types of currently recognizedinternational tax avoidance measures: transfer pricing, thin capitalization andinternational tax havens. And compared with transfer pricing and international taxhavens, thin capitalization’s operation is more subtle, practice situation is morecomplex. Therefore the use of thin capitalization gains transnational enterprises’favor,and it’s also rife in the domestic enterprises in recent years. Based on the new trend ofsuch an unreasonable tax avoidance, many countries have introduced the relevantpolicies and regulations for precaution. In2008, the New Enterprise income tax andRegulations for the implementation in our country introduced thin capitalization forthe first time, however, due to the asymmetry of market information and the lowefficiency of tax collection and management, the relevant policies and regulations inour country are mostly ended in text, the phenomenon of enterprises’ making use ofthin capitalization for tax avoidance unabated. Therefore, this paper intends topropose several ponders in improving our thin capitalization tax system construction,upon the title "Study on the issue of China’s thin capitalization anti-tax avoidance".The main content of this paper includes five parts:The first part, introduction. Starting from the concept of thin capitalization,pointed out the research background and significance, the research framework andmethods, and the research innovation and deficiency. As an international taxavoidance behavior, thin capitalization is a kind of special form of capital structure inessence, its formation mechanism is unable to be separated from the basic theory ofcapital structure. Therefore, the related literature reviews and comments also detailedon the basis of the capital structure theory, including the traditional capital structuretheory and the development of modern capital structure theory.The second part, the measurement and effect of thin capitalization. Thincapitalization’s measurement consisted of metric methods, metric space, metric indexsand metric content. The effect of thin capitalization varied with different interestsubjects, such as host country, resident company and non resident shareholder.The third part, the game analysis of China’s current situation of thin capitalization tax system. Based on the status of our enterprises’ capital weakening.this part discussed the affect the capital weakening separately from three angle viamodels and cases: corporation’s thin capitalization preference, corporation and taxauthority’s game, tax authority’s anti-tax avoidance.The fourth part, the international comparison and Enlightenment of anti thincapitalization tax avoidance. this part selected UK, Germany, the United States andItaly, the four representative countries had distinct comparison with each other incapital weakening rules and regulations. Combining with our national conditions, wecan get somewhat enlightenment.The fifth part, the ponders of improving our thin capitalization anti-tax avoidance.Establish the "management, service, investigation" three-in-one and unified anti thincapitalization prevention and control system, and then effectively improve the taxcompliance degree.Through the above-mentioned research on the five aspects, it contributes to theexpansion of the capital structure theory and the improvement of the anti thincapitalization system, provided theoretical basis for the thin capitalization regulationconstruction and reasonable measure; it is also conductive to strengthen the capitalmanagement of enterprise groups and multinational enterprises in practice, that is tosay, it is of important significance.