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International Transfer Pricing for Business Operations in China: Inducements, Regulation and Practice
Author(s) -
Chan Chow K. Hung, Lynne
Publication year - 1997
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.t01-1-00162
Subject(s) - transfer pricing , business , china , enforcement , economics , international trade , multinational corporation , international economics , industrial organization , finance , political science , law
This paper provides an empirical analysis of international transfer pricing in the People's Republic of China. The examination of the business environment in China reveals a mixed inducement for transfer pricing decisions by foreign investment enterprises (FIEs). The legislation on transfer pricing in China is similar to that of its major trading partners. Competition among local governments for foreign investment, inadequate resources for tax enforcement, and inadequate documentation by taxpayers hinder tax audits on transfer pricing. An analysis of aggregate import and export data does not support the allegation that, in general, FIEs shift profits out of China by over‐pricing their imports and under‐pricing their exports. However, there was some evidence of outward income‐shifting in certain key sectors.