国际避税地的有害税收竞争及防范措施论文.doc

The Harmful Competitions and Prevention Measures of International Tax Havens【Abstract】 This paper centers on the different expressions of analyzing the probability of increasing the international tax-avoidance activities after China has joined in the WTO and forecasting the trend and measures used by transnational taxpayers to avoid tax in China. We will discuss the definition of tax-avoidance, tax-evasion and anti-tax-avoidance rules to get some measures and means to improve the international anti-tax-avoidance and increasing the force of anti-tax-avoidance.【Key Words】international tax-avoidance; means of tax-avoidance; measures of anti-tax-avoidance; G201. The definition of the international tax havensThe international tax haven means that countries or areas which offer low or no taxation to income (or some forms of income) or entities (or certain entities) of the transnational investors. After China joined in the WTO, the transnational investors may make a use of the functions of tax haven. They can avoid tax through building different forms of corporations in the tax havens so that they can deal with different types of businesses and incomes. Then they use a combination of fixation of main part and movement of the object in order to avoid the tax. So, using the tax haven has been an important form of international tax-avoidance. Every country and international society has paid more and more attention to prevent and beat that form of tax-avoidance.Tax havens or tax heavens generally mean some financial centers which provide no taxation or low tax rate and lack of financial control. The definition of tax haven has experienced from positive evaluation to negative evaluation. Before 90s of the 20th century, most economists used and discussed the tax havens from a certain angle. But people started changing their angle of tax haven to become a heaven place of tax evasion, money laundering, break international economic and trade orders. Thus, every country or area stayed away from tax havens.The definition and the standard of the tax haven have not been unified in the entire world. Each country has its own definition and standard of the tax haven. Some countries use the list method as listing the blacklist of tax havens directly. More countries have used tax rate standard method to determine whether a country or area is the tax haven. Germany uses the low tax rules to determine 29 countries or areas where the effective tax rate is lower than 30% to be the tax haven. France uses the preferential tax rate rules to determine the 38 countries or areas where the foreign holding company set up in the no tax rate or lower than that of France for 2/3 to be the tax havens. United Kingdom sets that if a foreign holding company in an accounting of its income during the actual tax paid to the host country than the income tax by half of the British tax law, then the company will be identified to set up in tax havens. Japan sets 33 countries or areas where the tax rate is less than half of Japans tax as tax havens. And it has the law force. Belgium sets countries or areas where the tax obviously benefits to Belgium as tax havens. Most of countries dont set the definition of tax haven clearly. But the comparison between the foreign and domestic tax rate is always used as standard to measure the international tax heaven. So, the tax havens can be some countries or areas where subject income and entities to no taxation or much lower taxation than other countries. It is a relative concept.According to the latest edition of International Tax Glossary written by the International Bureau of Fiscal Documentation, countries or areas can be identified to tax havens while meeting the following conditions: 1. Much low or no taxation, especially the income tax and the capital gains tax. 2. Using inflexible bank and commercial security law. Never allow to reveal when keeping secret for the party. 3. No limitation in the exchange opening. 4. Refusing to the foreign taxation bureau of any cooperation. 5. Few or no tax agreement. 6. Convenient finance, transportation and information centre.In June, 2000, OECD published and determined the standard of tax havens: 1. No taxation or just nominal income tax of incomes come from financial or other services; or set local area for non-residents as the place to avoid their taxations of the country of residence.2. No effectively exchange of the information.3. Lack of openness4. Foreign entities make for build economic activities without any substance.It is easy to get from the above rules that the many countries standards of tax havens may be different from the international organizations standard. In some countries, domestic taxation laws define the tax haven just through the tax rate in order to increase the operation of taxation law. It is convenient and feasible to determine countries or areas subject no taxation or much lower than local tax rate to be the tax havens. But every countrys taxation law can not be the same. Then it leads to a chaos of tax haven definition and more arguments between countries or areas. At the same time, it provides opportunities for some countries which can make a use of the tax-avoidance rules of tax havens to revenge or punish in international trades to other countries. OECD uses comprehensive standard (tax rates, banks regulations) to determine the tax haven. And that is also the reason that China disagreed extremely when some western countries tried to list Hong Kong and Macao to the tax havens. To use Hong Kong as an example, it sets low tax rules. But Hong Kong has perfect banks regulations and tax-supervision measures. To compare with 5% tax rate or even no taxation in Cayman Islands or other tax havens, Hong Kong has natural difference. Thus, to list Hong Kong to the tax haven is not convincible from the OECD comprehensive standards. But if a country uses the tax rate standard to determine the tax havens. Hong Kong is probably listed to a tax haven as what Japan has done.2. Identifying harmful tax competition in international tax havensThe definition of harmful tax competition can not be defined precisely, but it has a common features: it does not seek to raise revenue to finance public expenditures but are adopted instead to exploit the inevitable weaknesses in the international tax rules of other taxing jurisdictions. There are two kinds of harmful tax practices: l Tax heaven l Harmful preferential tax regimesNow we would like to discuss the tax heaven.According to the OECD report, a tax heaven is a country with no or nominal taxes on income from mobile activities which also meets at least one of the following three additional conditions:n It does not exchange information effectively with other countries;It related to the ability or inability of residence countries to protect themselves against harmful tax competition.n It provides tax benefits to taxpayer in a non-transparent fashion;If the tax benefits are transparent, as they often will be in the case of tax heavens, and if the residence country can obtain information about the offshore activities of its residences, the residence country can be expected to take unilateral defensive measures to protect its tax base. It is much more difficult for countries to take defensive measures if tax benefits are provided by a country in ways that are not obvious. For example, a country may have a robust tax system on the surface, but then allow tax to be reduced through private rulings given to taxpayers or through negotiations as to the amount of tax to be taxed.n Is does not require nonresidents to engage in substantial activities in the tax haven in order to quality for tax benefits.It trends to indicate that the tax haven is facilitating the avoidance of residence country tax by allowing income to be booked to the heaven without any real income-earning activities there. No or nominal taxation by itself is insufficient to cause a country to be characterized as a tax heaven.3. The influences of harmful tax competition in international tax havens (from the standpoint of China)The influence of harmful tax competition is great, the following are listed:u Reduce fiscal revenueAccording to the authorities estimated in recent years, China suffers a loss of about 300 billion Yuan due to multinational companies tax avoidance. In fact, due to the complexity of tax avoidance, as well as the inadequate information and a high of monitoring costs, we simply can not thoroughly estimate it precisely.And as Chinas entry into WTO and the policy of reform and opening goes on, more foreign-funded enterprises enter China, Loss of tax revenue caused by tax avoidance will increase.u Go against the principle of fair competitionForeign-invested enterprises in China enjoy preferential tax policies, such as foreign Invested enterprise income tax rate is 15%, but the rate for domestic-funded enterprises is 33%.In addition, foreign-invested enterprises can enjoy Two years exemption, three halved policy. This has led to a different tax burden between domestic and foreign enterprises, the kind of unfair can be accelerated if tax avoidance is used by foreign corporate. Besides, for those foreign-invested enterprises who pay taxes as usual, it is also a kind of unfair competition in the market.u The interests of Chinese investors are harmedAccording to the statistics of annual foreign Enterprise Income from 1996 - 2000, the average loss is 65% to 70%. On the one hand foreign Enterprise suffers large losses, on the other hand a large number of foreign investors continue to invest in China, and the expansion of production scale continues as well, which is obviously inconsistent with the basic principles of economics.Foreign-invested enterprises, particularly joint ventures or cooperative enterprises, the foreign investors often make huge profit from making the import prices of raw materials higher, while the export prices lower than usual. The Chinese shareholders suffered huge loss. Through foreign investors has to pay much more tax in foreign country, but it has the 100%of the after-tax profits. Then as long as it has a chance to “steal” profit, it will take reverse avoidance measures. However, for the Chinese joint ventures, they have to share with foreign investors for the loss, but has no right entitled to share profits. Consequences resulting from it is that Chinese investors ha to sell the company shares to reduce losses, leading to gradual loss of the companys ownership, or letting the companys capital more and more worthlessu Affect our foreign exchange balance To avoid taxes, taxpayers often take a variety of means to transfer Profits across different countries, leading to a chaos in international capital flows, and it harms the normal international economic cooperation and exchanges. For those two outjoint ventures, imported raw materials price is high, requiring a lot of foreign exchange, but the price received from the sale of the products is low, so the foreign exchange acquired is limited. With time goes on, it will affect Chinas foreign exchange balance, and thus our national economy will also be affected.4. The background of avoidance of tax by tax haven in America and anti-tax-avoidance measures in AmericaUsing tax heaven to tax avoidance is one of the most popular anti-avoidance ways. It harms most countries welfare; many countries have enacted anti-avoidance legislation to boycott this situation which always breaks the economic of one country. As the national anti-tax haven legislation is mainly used for controlled foreign companies, so also known as controlled foreign company legislation. As the legislation, they got some reward. Now we will introduce something about Americas way.The US is the first country which set up the legislation to against the controlled foreign company(CFC), Now we can analysis the way in serous first, Controlled foreign corporation (CFC) rules are features of an income tax system designed to limit artificial deferral of tax by using offshore low taxed entities. The rules are needed only with respect to income of entities that is not currently taxed to the owners of the entity. The tax law of many countries, including the United States, does not tax a shareholder of a corporation on the corporations income until the income is distributed as a dividend. Prior to U.S. CFC rules, it was common for U.S. publicly traded companies to form foreign subsidiaries in tax havens and shift portable income to those subsidiaries. Income shifted included investment income (interest and dividends) and passive income (rents and royalties), as well as sales and services income involving related parties. U.S. tax on this income was avoided until the tax haven country paid a dividend to the shareholding company. This dividend could be avoided indefinitely by loaning the earnings to the shareholder without actually declaring a dividend. When present Kennedy enter the white house, he aroused to committee that they should abolish the policy of deferred taxation of their American people, by discussing, the committee of US did not entirely allowed Kennedy idea but abolish the deferred taxation from tax heaven. Now the CFC rules come to the world. It requires a U.S. Shareholder of a Controlled Foreign Corporation must Include in his/its income currently His/its share of Subpart F Income of the CFC and His/its share of earnings and profits (E&P) of the CFC that are invest in United States Property, and further Exclude from his/its income any dividends distributed from such previously taxed income. For more then half contrary, the part of CFC rule has become the most complex part in American tax rules.First of all, we may know when the government should classify the American people to the shareholders of the CFC. Each of the capitalized terms above is defined. A CFC is any corporation organized outside the U.S. (a foreign corporation) that is more than 50% owned by U.S. Shareholders. A U.S. shareholder is any person (individual or entity) that owns 10% or more of the foreign corporation. Complex rules apply to attribute ownership of one person to another person. The CFC rules of Subpart F were intended to cause current taxation to the shareholder where income was of a sort that could be artificially shifted or was made available to the shareholder. At the same time, such rules were designed not to interfere with normal commercial practices.Subpart F income includes the following types of income: 1. Foreign Personal Holding Company Income including dividends, interest, rents, royalties, and gains from alienation of property that produces or could produce such income. Exceptions apply for dividends and interest from related persons organized in the same country as the CFC, active rents and royalties, rents and royalties from related persons in the same country as the CFC, and certain other items.2. Foreign Base Company Sales Income from buying goods from a related party and selling them to anyone or buying goods from anyone and selling them to a related party, where such goods are both made and for use outside the CFCs country of incorporation. A branch rule may cause transfers between a manufacturing branch of a CFC in one country and a sales branch in another country to trigger Subpart F income.3. Foreign Base Company Services Income form performing services for or on behalf of a related person. A substantial assistance rule can cause services performed for unrelated parties to be treated as performed for or on behalf of a related party.4. Foreign Base Company Oil Related Income from oil activities outside the CFCs country of incorporation.5. Insurance Income from insurance or annuity contracts related to risks outside the CFCs country of incorporation.Certain broad exceptions apply to negate the requirement of inclusion for particular income. Subpart F income does not include items of income which (after considering deductions, etc., under U.S. concepts) were subject to foreign income tax in excess of 90% of the highest marginal U.S. tax rate for the type of shareholder. Subpart F income need not be included, in absence of other Subpart F income. Subpart F income is deferred if the CFC has a deficit in E&P, until the CFC has positive E&P.In addition, a U.S. shareholder must include in his/its income his/its share of E&P invested in U.S. Property. For this purpose, U.S. Property specifically includes obligations of or investments in related parties, tangible property with physical suits in the U.S., and stock of a domestic corporation. It does not include bank deposits or obligations of unrelated persons.U.S. rules provide that a U.S. shareholder excludes from his/its income any dividend received which is considered paid from amounts previously taxed under Subpart F.Corporate U.S. shareholders are entitled to a foreign tax credit for their share of the foreign income taxes paid by a CFC with respect to E&P underlying a Subpart F inclusion.To prevent avoidance of Subpart F, U.S. shareholders of a CFC must characterize gain on disposition of the CFC shares as a dividend. In addition, various special rules apply.From the details information for classifying the income from CFC, we can find that American government is thinking much of the CFC, and want defeat the tax heaven. 5. Measures in Japan and compare the anti-tax haven system between USA and JapanJapans tax system have a special anti-avoidance measures. In 1978, Japan uses the method of Taxation Special Measures Law, started to establish measures tax havens system. Japan Definition the Tax Havens is the countries and regions that companys total income, or the tax burden of certain types of income tax much lower than the tax burden of Japans domestic corpor