Profit Shifting and Risk Shifting of Multinational Enterprises in China

主讲人：Xiangjun Ma

主持人：余淼杰、余昌华（北京大学国家发展研究院）

时间：2022年06月14日（周二）上午10:30-12:00（北京时间）

地点：承泽园246教室

Zoom会议号：926 3889 7210

密码：908060

摘要：

With the rapid growth of outward foreign direct investment (OFDI) in China, a large amount of mature multinational enterprises (MNEs) have developed. Though it is well-known that MNEs’ profit shifting behavior leads to corporate tax base erosion of the government, the profit shifting channel of Chinese MNEs, especially for the inter-company services transactions, has not been explored. Existing studies in profit shifting estimation of Chinese MNEs mainly consider only tax havens and their channel examination focuses on related-party export prices of goods or internal loans. However, OECD transfer pricing regulations have restricted these channels to a high degree and the most commonly used tax avoidance strategies of MNEs in reality are risk shifting and IP relocation, which can be applied to both goods transactions and services transactions. This paper fills the literature gap by (1) comprehensively estimating the profit shifting size of Chinese MNEs in both tax havens and non-tax havens, and (2) testing MNEs’ risk-shifting mechanism that is in compliance with the transfer pricing regulations. We use 2000-2013 firm-level data and find that higher tax rate differences between China and OFDI countries are associated with more risk shifting and profit shifting to low tax countries. These effects are robust in non-tax havens, and more significant for firms with more intangible assets as well as smaller firms. Our findings suggest that the current international BEPS (base erosion & profit shifting) framework still has loopholes for MNEs to shift profit and thus the participation in the new BEPS Two-Pillar Plan is supportable for China.

主讲人简介：

Xiangjun Ma is a Visiting Scholar at the National School of Development at Peking University and was an Associate Professor at the University of International Business and Economics. She received a Ph.D. degree in Economics from the University of Virginia and a B.A. degree in Economics from Renmin University of China. Her research interests are Multinational Enterprises and International Taxation, International Economics, Applied Microeconomics, and Political Economy. She worked as an Economist and Manager in Transfer Pricing at Deloitte Tax LLP and Baker Tilly US, LLP.