Impact of Transfer Pricing for Special Tax Adjustment Measures on Corporate Effective Tax Rate in China

Abstract

Corporate tax avoidance activities are prevalent in many countries, some of which have formulated anti-tax avoidance policies to curb such activities. China amended the chapter on special tax adjustment in the Enterprise Income Tax Law in 2008 and implemented Measures for Special Tax Adjustment in 2009. This study applies the Shanghai and Shenzhen A-share securities markets in 2005-2015 to investigate whether the implementation of Measures for Special Tax Adjustment has effectively curbed corporate tax avoidance activities and increased income tax costs. The empirical results indicate that company effective tax rates (ETRs) are increased significantly after the implementation of Measures for Special Tax Adjustment. And, companies with greater amounts of goods (or service) related party transactions significantly increased ETRs after the implementation of Measures for Special Tax Adjustment.

Local government debt and corporate tax burden: A perspective based on the trade-off of government tax collection and management

“…Tax revenue is the largest component of China's fiscal revenue [26]. A number of studies have pointed out that due to the lack of the right to set tax categories and tax rates [18,19], when local governments face increasing financial pressure and need to increase fiscal revenue, they will increase their own financial resources by adjusting the intensity of regional tax collection [20]. However, the relevant literature has not reached a consensus on the direction of adjustment of tax collection intensity.…”

“…However, the relevant literature has not reached a consensus on the direction of adjustment of tax collection intensity. Some studies believe that when local financial resources are limited, local governments will strengthen tax enforcement to offset short-term negative fiscal shocks [18][19][20]. Some other studies believe that the decrease of fiscal revenue and the mismatch of fiscal revenue and expenditure will induce tax competition among local governments, which means local governments will ensure the steady growth of fiscal revenue by reducing the intensity of tax collection and attracting the injection of liquid tax base [27,28].…”

“…Although the tax laws and tax systems in different regions of China are similar, there are great differences in the enforcement strength and discretion among regions, which provides flexibility for local governments to implement tax collection and management according to their actual needs [17]. When faced with fiscal sustainability risks, local governments can choose to strengthen tax enforcement to increase tax revenue, or they can choose to reduce tax collection effort to attract the liquid tax base to expand their fiscal capacity [18][19][20]. Compared with economically developed areas, due to the lack of competitiveness, local governments in undeveloped areas often need to give more tax incentives to enterprises to retain them or attract other investments [21].…”

Apakah Transfer Pricing Mempengaruhi Pajak? : Tinjauan Sistematis

“…Ketika otoritas pajak semakin melindungi pendapatan pajak perusahaan, praktik penghindaran pajak yang menyesatkan akan mengakibatkan sanksi pajak. (Wang & Chen, 2020). Di Asia Tenggara, Indonesia tergolong sebagai negara dengan yang memiliki tarif pajak yang tinggi.…”

Cross-cultural Differences in Electronic Word-of-Mouth: A Literature Review

“…However, the literature on this is rather scarce as the links are difficult to be measured. We can see some proxy effects -effective tax rates increased in China after anti-avoidance measures were implemented (Wang, Chen, 2020). Intangibles have to be priced according to the underlying substance, not merely per TNC's wish (Grassinger, 2017).…”