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Article
International transfer pricing for business operations in China : inducements, regulation and practice
Journal of Business Finance and Accounting
  • Koon Hung CHAN, The University of California-Riverside, The Chinese University of Hong Kong
  • Lynne CHOW, Hong Kong Polytechnic University
Document Type
Journal article
Publication Date
10-1-1997
Keywords
  • international transfer pricing; inducements; over-pricing of imports; under-pricing of exports; China
Disciplines
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.
DOI
10.1111/1468-5957.t01-1-00162
E-ISSN
14685957
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Citation Information
Hung, K., & Chow, L. (1997). International transfer pricing for business operations in China: Inducements, regulation and practice. Journal of Business Finance & Accounting, 24(9-10), 1269-1289. doi: 10.1111/1468-5957.t01-1-00162