China taking multinational corporations to task on tax

   0   0 Blog, Corporate Tax

china-flagThis has been brewing for some time. An extensive audit has begun in China of transnational corporations (TNCs) shifting profits for service fees and management fees that are paid to related parties, often in tax havens offshore.  

The tax audits cover a period of ten years, from 2004 to 2013, and include all payments made to related parties over that span of time. Many TNCs are now expecting major assessments from China if the business purpose for these payments cannot be established. Interestingly, China is also taking a stance that all management fees should be denied, as they should be treated as stewardship expenses and necessary for the conduct of its global business. China believes that such costs should not be charged to subsidiaries in China.

For more details, see this PwC analysis here.

Now whatever the reasons for China’s stance, or the particular outcomes, it’s worth asking: imagine if all countries took a similar stance. Why wait for the OECD’s BEPS process to unfold, with the OECD telling the (mostly OECD-based) TNCs to behave a little better?

Developing countries can take control of their own destinies, and these issues are very much in their control.  It seems that at least part of the issue is about the OECD’s unworkable methods themselves.

We have presented alternatives to current practices, as well as to the entire OECD-led approach, in articles such as this one, focused on developing countries, or this one, focused more generally.


Related Posts

New estimates reveal the extent of tax avoidance by multinationals

Price Waterhouse CoopersNew figures published today by the Tax Justice Network provide a country-level breakdown of the estimated tax losses to profit shifting by multinational companies. Applying a methodology developed by researchers at the International Monetary Fund to an improved dataset, the results indicate global losses of around $500 billion a year. The figures appear in a […]


Banking Secrecy in China, its related territories and Taiwan

Hong Kong from Sky 100Foreword. The Tax Justice Network is a non partisan network of experts working towards transparency, so we do not take any position about countries’ territorial and political claims. However, we do expect countries with a de jure (legal) or de facto (in practice) influence over other territories, to take responsibility for their power. We point […]


Is tax avoidance at the heart of Ireland’s economic miracle?

AIB International Finance Centre Dublin - By Estoy Aquí (Own work) [GFDL ( or CC BY 3.0 (], via Wikimedia CommonsComing out of the economic crisis Ireland was one of the best performing economies, with GDP growth rates of 8.5% in 2014 and an extraordinary 26.3% in 2015. But how much of this economic activity was real, and how much a fiction created by Ireland’s tax haven status? A new paper by Heike Joebges of the University […]


New Report: HMRC’s “Building our Future” programme

bigben-mcbigbenfaceYesterday the Tax Justice Network was in the UK Parliament to launch a report it co-produced with the Public and Commercial Services Union. The report, entitled “HMRC, Building an Uncertain Future” is a study of HMRC’s (the UK tax authority) reform plans which it is calling “Building our Future”. The report published yesterday analysed the […]


Financial secrecy in football: time for action

bigben-mcbigbenfaceEveryone has known for years that football is rotten to the core and financial secrecy is at the heart of the problem. Why then is no one doing anything about it? This post from the Offshore Game project originally features in the Independent. 


Leave a Reply

Your email address will not be published. Required fields are marked *

Back to Top