China: International Anti-tax Avoidance Actions

Currently, including China, at least 50% of global profits come from transnational transactions, yet transnational corporations are paying such a minimal amount of taxes. The existence of tax haven and the more relaxed regulations on international capital flow are two main contributing factors to the increased tax avoidance activities carried on by transnational corporations. 

In view of this, countries around the globe must reform the current Regulations and Systems of International Taxation. During the G20 Summit, leaders have declared that they will reach an agreement on the implementation plans to confront tax avoidance scheme by transnational corporations, before end of 2015. 

“The ‘Tax Base Erosion and Profit Shifting (BEPS)’ plan started during the G20 Summit deserved to be regarded as the greatest international taxation system reform in the past centuries.” said Liao Tizhong, the Director of International Customs Commissioner in State Bureau of Taxation. The reform principle established during G20 Summit is taxing the profits where business activities are carried on and the values are created. In general, tax agreement reached during G20 Summit is favourable to countries with rich genuine economy activities such as China. 

According to the agreements reached by leaders during G20 Summit, in order to prevent tax avoidance among countries, almost one hundred countries and regions promised to exchange international tax information automatically. China is very committed to the information exchange, in the efforts to reinforce the anti-tax avoidance actions. 

Apart from the above, China has in August 2014 signed its first international multilateral tax collection agreement – “Mutual Assistance Conventions for Multilateral Tax Collection and Management” to take part in International Anti-tax Avoidance Actions. With this, China will upgrate its anti-tax avoidance and International Tax Revenue Administration System. 

In recent years, China has been constantly strengthening the Anti-Avoidance Actions. The result is welcoming, showing increase of tax revenue from 460 million RMB in 2005 to 46.9 billion RMB in 2013. China believes that the additional commitment in International Anti-tax Avoidance Actions will bring more tax revenue in years to come.