Assessing the Influence of Country-by-Country Reporting (CbCr) on Cross-Border Related Party Transactions: Insights from China

Bochuan Yang () and Tengchong Xu
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Bochuan Yang: Central University of Finance and Economics
Tengchong Xu: Central University of Finance and Economics

Journal of the Knowledge Economy, 2025, vol. 16, issue 1, No 169, 4855-4897

Abstract: Abstract International organizations have enacted diverse regulations to tackle multinational firms' cross-border tax avoidance strategies. This study investigates the effectiveness of the Country-by-Country reporting (CbCr) action, part of the BEPS Project's 13th Action, in mitigating cross-border tax evasion among Chinese multinational corporations. Utilizing a quasi-natural experimental design, we employ regression discontinuity analysis to examine the influence of CbCr on the scale of cross-border transactions between affiliated companies. Our findings indicate that CbCr effectively reduces transactions with jurisdictions known for favorable tax treatment, highlighting its role in decreasing the magnitude of cross-border tax avoidance activities. However, the research also reveals that CbCr has little significant effect on transactions involving labor and intangible assets, suggesting a gap in the current regulatory framework. By offering empirical evidence on the efficiency of international tax policies, this study contributes to the knowledge economy, providing valuable insights for policymakers. It underscores the need for more comprehensive regulations prioritizing the valuation and control of intangible assets to address cross-border tax evasion more effectively. The findings enhance our understanding of the dynamics of tax evasion strategies employed by multinational businesses and the role of international policies in shaping these practices, offering significant implications for both developed and developing economies in the global taxation landscape.

Keywords: Cross-border tax avoidance; Country-by-Country reporting (CbCr); Regression discontinuity method; Multinational corporations (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s13132-024-02024-6

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