Does Information Exchange Affect Cross‐border Tax Avoidance? Evidence from the Common Reporting Standard

Muhan Wang, Kezhong Zhang and Sihan Gao

China & World Economy, 2024, vol. 32, issue 4, 179-228

Abstract: Using panel data from 2012 to 2020 for publicly traded Chinese companies, we explored the efficacy in mitigation of tax information asymmetry to combat profit shifting and transnational tax avoidance. Our empirical analysis revealed that, after the implementation of the inaugural multilateral automatic information exchange system known as the Common Reporting Standard, there was a statistically significantly increase in the effective tax rate by 1.4 percentage points, accompanied by an increase in instances of tax compliance. These trends were discernibly associated with a reduction in profit shifting and notable changes in reported profit margins, particularly influenced by actions related to debt shifting and strategic management of intellectual property assets. These findings underscore the strong connection between these effects and various factors such as investment destinations, asset portfolios, and industry classifications. The results imply a prospective decline in the incidence of cross‐border tax avoidance by Chinese multinational entities and demonstrate the potential of emerging international tax cooperation frameworks for curbing the global tax avoidance practices of multinational corporations.

Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/cwe.12544

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:chinae:v:32:y:2024:i:4:p:179-228

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1671-2234

Access Statistics for this article

China & World Economy is currently edited by Yongding Yu

More articles in China & World Economy from Institute of World Economics and Politics, Chinese Academy of Social Sciences Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().