Spillover effects of VAT Self-enforcement properties:Evidence based on the replacement of business tax with VAT reform

In accordance with the purchasing tax-deduction method and the receiptbased value added tax(VAT)system,the same transaction can be recorded by two firms,which creates self-enforcement properties,thereby restraining tax avoidance.Using the Replacement of Business Tax with VAT reform in China,this paper adopts a difference-in-differences design to investigate the spillover effects of VAT self-enforcement properties on corporate income tax avoidance by manually collating information about suppliers/clients of listed firms.As the listed firms’suppliers/clients switch from paying business tax to paying VAT,there is a striking decline in their corporate income tax avoidance behavior.This effect is pronounced in firms with closer upstream and downstream correlations,higher information complexity and stronger incentives for tax avoidance.

China's Tax Reforms in Facilitating Globalization and the Belt and Road Initiative

Since the proposal of the Belt and Road Initiative(BRI)in 2013,the economic and trade cooperation between China and related BRI economies has flourished over the past eight years.The Chinese government has given top priority to improving its doing-business environment to implement the national initiative of"bringing in"and"going abroad",which echoes the BRI economic activities.Being a core part of the doing-business environment,tax reforms and the building of a more growth-friendly tax environment serve as one of the key drivers to further attract foreign investment and encourage domestic enterprises to go abroad.This article starts with the background of China’s tax reforms,followed by an in-depth analysis of the corporate income tax and individual income tax reforms,and finally discusses the impacts of China’s tax reforms on cross-border investment and trade.

Transfer Pricing in BEPS Project and China's Response

A major concern on base erosion and profit shifting(BEPS)is transfer pricing,which is discussed in BEPS Action Items 8-10 and 13.Actions 8-10 contain revised guidance,which ensures that transfer pricing rules secure outcomes that better align operational profits with the economic activities that generate them,as well as guidance on transactions involving cross-border commodity transactions and on low value-adding intra-group services.Action 13 contains a three-tiered standardized approach to transfer pricing documentation,including a minimum standard on country-by-country reports(CbCRs).However,the approach of Actions 8-10 still focuses on the restoration of the dysfunctional rules built on the arm's length principle,which is rooted in the principle of separate independent entity.The threshold of Action 13 excludes many large multinational enterprises(MNEs)from the CbCR requirement and deprives developing countries access to the information of MNEs below the threshold.Chapter 6 of the Chinese Corporate Income Tax Law,under the title"Special Tax Adjustments,"provided the legal foundations of transfer pricing and transfer pricing documentation in China.To effectively implement the BEPS package in China and to comprehensively update the existing Circular 2,the State Taxation Administration(STA)released a Discussion Draft of a Circular on Implementation Measures for Special Tax Adjustments in September 2015,ranging from Action 3(controlled foreign company rules),Action 8-10(aligning transfer pricing outcomes with value creation)to Action 13(transfer pricing documentation and country-by-country reporting)in details.Right now,a series of patches,such as the STA Bulletins 45,42,64,and 6,have been made to replace a substantial part of Circular 2.

On the Road Towards a Competitive Tax System:Hungarian Perspective

Following the 2008 economic crisis,Hungary introduced a series of growth-oriented tax changes.These changes were rooted in the"taxation and growth"literature of the 2000s.Measures included large cuts in direct taxes on labour and profits,consumption tax increases and significant measures to combat the shadow economy.At the same time,the priority of international tax policy discussions shifted more towards equity concerns,which led to a new OECD initiative on a global minimum corporate income tax(GloBE).The compromise proposal leaves a limited space for tax policy measures aiming to neutralize distortions associated with corporate income tax and to promote capital accumulation and productivity,but some room will remain.