An empirical study of tax audits in China on international transfer pricing
Document Type
Journal article
Source Publication
Journal of Accounting and Economics
Publication Date
5-1-1997
Volume
23
Issue
1
First Page
83
Last Page
112
Publisher
Elsevier BV
Keywords
Tax audits; International transfer pricing; China
Abstract
This research studies how Chinese tax authorities implement international transfer pricing legislation. The analysis indicates that tax audits on transfer pricing are confined mainly to medium- and small-sized foreign investments, lower-technology companies and transfer of tangible goods, and tend to focus on certain nationality and forms of foreign investment. Persistent losses, low profitability and lack of local partners in joint venture management most often trigger tax audits. The authorities focus on profit results rather than prices, and often use comparable profit method to adjust income. Tax differentials do not appear to be the most important inducement to transfer pricing manipulations.
DOI
10.1016/S0165-4101(96)00445-4
Print ISSN
01654101
Publisher Statement
Copyright © 1997 Published by Elsevier B.V.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Chan, K. H., & Chow, L. (1997). An empirical study of tax audits in China on international transfer pricing. Journal of Accounting and Economics, 23(1), 83-112. doi: 10.1016/S0165-4101(96)00445-4