Tax Issues in China

Authored by: Tao Zeng

The Routledge Companion to Accounting in China

Print publication date:  September  2018
Online publication date:  September  2018

Print ISBN: 9781138678538
eBook ISBN: 9781315558899
Adobe ISBN:


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This essay reviews the tax system and its development in China. It also surveys and discusses two major areas of research in accounting that are related to Chinese taxes. They are: corporate governance, ownership structure, and tax aggressiveness; and corporate reactions to the 2008 corporate tax reform. In addition, this essay examines inter-temporal income shifting as well as the impact of ownership structures on income shifting during the 2008 corporate tax rate reduction. Using Chinese listed real estate firms during 2007 and 2008, this study shows that firms had a significantly higher total income for the quarter ending March 2008 - the first quarter of the tax rate cut, suggesting that firms shifted income to the low-tax periods. Further analysis shows that these results also hold for operating income but not for non-operating income. It also shows that corporate ownership structures, including large shareholders and state ownership, are important factors in connection with both total and operating income shifting. However, institutional shareholding and inside shareholding do not affect firms’ income shifting decisions.

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