Title

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

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

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Full-text Version

Publisher’s Version

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