The tax avoidance behavior of multinational corporations has always been simply regarded as unpunished. But in fact, this behavior is extremely complicated. This paper tries to understand the tax avoidance behavior of multinational companies from different angles and put forward my own views.
Keywords: transnational tax avoidance transfer pricing
Transnational corporation is a special economic entity. As far as the tax avoidance behavior of multinational corporations is concerned, the traditional view has always been that tax avoidance behavior is caused by loopholes in the law, and the adverse consequences caused by legislative loopholes cannot be attributed to the legal counterpart. What is a loophole in tax law? Huang Maorong, a scholar in Taiwan Province Province, made an analysis of legal loopholes: if law A is not completely standardized, or if the norms of law B are contradictory, or if law C is not standardized at all, or if law D is not properly standardized, then as far as life facts are concerned, the law is flawed. Therefore, multinational companies must use the existing incomplete or contradictory norms or irregular or inappropriate norms of China tax law to avoid tax, which is not imputable. However, the author believes that some illegal tax avoidance behaviors are also given a legal coat because of the mixed concept of tax avoidance, which is called tax planning or legal tax avoidance in a dignified way.
I. Classification of Tax Behavior of Multinational Corporations
Song Ning, a senior tax consultant of Deloitte Touche Tohmatsu, believes that there are three kinds of tax avoidance behaviors of multinational companies: the first is tax avoidance that conforms to the national legislative intent; The second is to use national policies to avoid taxes, but although this kind of behavior has no legal support, it does not obviously violate the provisions of the law; The third is illegal tax avoidance, including illegal transfer pricing and other acts. Professor Liu Jianwen, an expert in tax law in Peking University, divides the tax avoidance behavior of multinational companies into two categories: legal tax planning or tax arrangement behavior and illegal tax avoidance behavior. The former tax planning or tax arrangement behavior is legal within the scope of law or at least because it is not illegal, so there is no punishment. Tax planning or tax arrangement includes both tax arrangement behaviors encouraged by tax law and behaviors not encouraged but not explicitly prohibited by tax law. Among them, the behavior that is not encouraged but not explicitly prohibited by the tax law is equivalent to the above-mentioned neutral behavior, that is, the behavior that is "not expressly stipulated by the law". Generally speaking, tax avoidance (tax planning or tax arrangement) refers to this neutral behavior that should not be bound by harsh tax laws. However, it is precisely because of the mixed concept of tax avoidance that some illegal tax avoidance behaviors have also been given a legal coat, which is solemnly called tax planning or legal tax avoidance. These acts belong to the illegal tax avoidance mentioned in this paper, which essentially violates China's tax law, but they have always been taken for granted as legal tax avoidance or tax planning. It can be seen that the view that transfer pricing and capital weakening of multinational companies are simply identified as neutral tax avoidance or abuse of tax treaties lacks the necessary legal support. The author believes that whether an act is illegal or not should be carried out in strict accordance with the provisions of existing laws and regulations. According to the current laws and regulations, the tax-related behaviors of multinational corporations can be roughly divided into the following categories:
The first is the legal tax behavior of multinational corporations. The so-called legal tax behavior of multinational corporations refers to the behavior of multinational corporations in strict accordance with the provisions of the law, that is, in strict accordance with China's current effective laws and regulations to exercise their rights and fulfill their tax obligations. It should be pointed out that according to China's current tax law system, the laws here include laws passed by the National People's Congress and its Standing Committee, administrative regulations promulgated by the State Council, departmental rules formulated by the State Council departments, local regulations and other effective legal documents. The tax-related activities of multinational corporations in accordance with the provisions of these laws are legal and should be affirmed by the state before legislative changes.
The second division is the behavior between legal and illegal. From the perspective of jurisprudence, this is equivalent to a neutral behavior. That is, the act of "there is no express provision in the law". This kind of neutral behavior is beyond the scope of legal adjustment, which is neither allowed nor prohibited by law. So it is neither legal nor illegal, so it is called "neutral" in legal nature. Specifically, no matter what the starting point is, neutral behavior should not be judged negatively because it belongs to the scope of existing laws.
The third behavior of multinational corporations: illegal evasion of tax legal obligations. In practice, this kind of behavior has extremely complicated manifestations. The traditional view of denying the illegality of tax avoidance is to attribute the occurrence of tax avoidance to legal loopholes. In fact, the problem focuses on the boundary between the second tax avoidance behavior and the third tax avoidance behavior, that is, what kind of behavior is neutral tax avoidance behavior and what kind of behavior should be recognized as tax evasion. It is true that the adverse consequences caused by the limitations of legal legislation technology and the defects of the law itself should not be borne by the parties concerned. But what is tax avoidance? Whether all the tax-related behaviors of multinational corporations can be included in this tax avoidance behavior is obviously not available.
In view of this, taking the transfer pricing commonly used by multinational companies as an example, it is necessary for us to further explore the tax avoidance behavior of multinational companies under the framework of China's tax law with the help of the basic principles of tax law, so as to determine its legal nature.
Second, the essence of tax avoidance behavior of multinational corporations-from the perspective of transfer pricing
As mentioned in this paper, transfer pricing is the behavior of multinational companies to reduce the tax payable in the host country through special means and arrangements such as related party transactions, resulting in the loss of tax revenue in the host country. For the nature of transfer pricing behavior of multinational companies, we can make a necessary analysis from the basic principles of tax law.
As the basic principle of China's tax law, the principle of substantive taxation has axiomatic effect. It is the most important principle to interpret and apply the tax law except the principle of tax legalism. Therefore, some scholars believe that building an independent tax law foundation is a contractual principle. Different from the principle of tax legalism, the principle of substantive taxation emphasizes the "essence" of economic phenomena, that is, the effect of eliminating the false and retaining the true. "If the real behavior is concealed by pretending, even if it is pretending, the real behavior should be used as the tax basis". If we proceed from the superficial form stipulated by law, impersonation may not belong to the formal requirements stipulated by law because of its deception, but according to the principle of substantive taxation, impersonation does not lose its "taxable" because of its superficial deception.
The principle of fair tax burden is also called the principle of tax burden according to ability or the principle of tax burden according to capacity. Mill and Pigou introduced the concept of relative sacrifice into the tax law, arguing that people with the same tax paying ability should bear the same tax, and people with different tax paying ability should bear different taxes. This view has also been introduced into the concept of tax law by tax legislators, and finally formed the principle of fair tax burden. If it is difficult to embody the principle of tax burden fairness in the horizontal comparison of different taxes such as turnover tax and income tax, then the problem of tax burden fairness under the same tax item and the same tax object is extremely prominent. In fact, because China's special commodity tax system is different from that of foreign countries, value-added tax and business tax are levied in parallel. The collection of value-added tax runs through the whole process of commodity production and circulation, and there are many preferential tax measures, such as tax refund and exemption, as well as the mixed operation and part-time operation of enterprises themselves, which makes tax evasion promising. The existence of these factors makes the nominal tax rate and the actual tax rate quite different, and the actual tax burden of enterprises is unbalanced. If we think that capital weakening and other behaviors are tax avoidance behaviors in investment strategies, then it is an obvious and intentional tax avoidance behavior for multinational companies to artificially adjust the price of goods or services to deviate from the fair value of the market in order to avoid tax obligations. The existence of this behavior makes its tax obligation illegally reduced, thus gaining stronger market competitiveness than other normal enterprises. But at present, many enterprises are fleeing in the name of tax planning.
Therefore, it is not appropriate to simply reject the illegality of tax avoidance by multinational corporations in practice. We need to further study how to deal with this behavior of multinational companies.
References:
[1] Huang Maorong. Legal method and modern civil law. Taiwan Province Province: Sanmin Bookstore, 1987.
[2] Kitano Hirohisa. Chen Gang, translated by Luo Yongzhen. About tax law. Chengdu: Sichuan People's Publishing House, 1994.
[3] Ding Yisheng. On neutral behavior beyond legal adjustment. Law Press, 1993.
[4] Western tax principles and their reference to China. Law Review, 1996, (3).