Did the anti-avoidance rules curtail the profit shifting of foreign multinationals in China?

Mantian Xue

China Economic Review, 2024, vol. 88, issue C

Abstract: This paper analyzes the policy effect of the anti-avoidance rules introduced on January 1, 2008 on profit shifting of foreign multinationals in China. Based on micro data from the OSIRIS database, this paper finds that the anti-avoidance rules were quite effective in curbing profit shifting of foreign multinationals through raising the pre-tax margin of subsidiaries in China relative to those outside China by about 6.5 percentage points, or about 7.6 percentage points considering the anticipation effect. Besides, the results indicate that the anti-avoidance rules were more effective for multinationals in service industries or those registered in non-haven countries.

Keywords: Anti-avoidance rule; Profit shifting; Foreign multinational (search for similar items in EconPapers)
JEL-codes: F2 H2 H3 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:88:y:2024:i:c:s1043951x24001883

DOI: 10.1016/j.chieco.2024.102299

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