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International Transfer Pricing for Business Operations in China: Inducements, Regulation and Practice

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  • K. Hung, Lynne Chan Chow

Abstract

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.

Suggested Citation

  • K. Hung, Lynne Chan Chow, 1997. "International Transfer Pricing for Business Operations in China: Inducements, Regulation and Practice," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(9‐10), pages 1269-1289, October.
    • Handle: RePEc:bla:jbfnac:v:24:y:1997:i:9-10:p:1269-1289
    DOI: 10.1111/1468-5957.t01-1-00162
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    Cited by:

    1. Swati Verma, . "Intrafirm trade and tax haven linkages: Evidence from Indian manufacturing," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    2. Chan, K. Hung & Lo, Agnes W.Y. & Mo, Phyllis L.L., 2015. "An empirical analysis of the changes in tax audit focus on international transfer pricing," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 24(C), pages 94-104.
    3. Chan, K. Hung & Lo, Agnes W. Y., 2004. "The influence of management perception of environmental variables on the choice of international transfer-pricing methods," The International Journal of Accounting, Elsevier, vol. 39(1), pages 93-110.

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