Tax avoidance in E-commerce from the perspective of China

Abstract

The development of Internet technology has also led to a rapid growth in electronic commerce (E-commerce). Internet makes commercial activities easier and quicker. At the same time, E-commerce brings some problems to tax imposition as Internet exists nowhere but anywhere, which makes the traditional definition of "permanent establishment", "resident" and "tax jurisdiction" becoming obscure or even unnecessary. Meanwhile, in China, there is as yet no legal definition of E-commerce, tax avoidance, digitized goods, intangible assets and online services, and there are no regulations covering how to impose a tax jurisdiction over nonresidents using E-commerce, especially for digitized goods, intangible assets, and online services, where there will be more chances for tax avoidance. Therefore, how to reduce tax avoidance in E-commerce in China is a new and important issue. In order to resolve this issue, this dissertation tries to explore the definition of tax avoidance, the reasons of tax avoidance, the results of tax avoidance, and the main methods of tax avoidance. Certainly, it is also important to define E-commerce and examine its natures. This dissertation sets out some suggestions based on the above exploration for reducing tax avoidance in E-commerce. These include closing the loopholes in taxation law, improving its equity, improving the governing ability of the tax authorities, increasing penalties, setting up a new taxation culture, changing the definition of residence and permanent establishment for E-commerce, changing the scope of tax jurisdictions, reforming the tax base for different tax types, clarifying the definition of digitized online goods and intangible assets, having clear regulations covering how to tax online services, applying and improving traditional anti-tax avoidance methods, such as applying the principle of substance over form, regulating transfer pricing between associated parties, reforming the CFC rules, improving international cooperation, limiting harmful tax competition, and reducing the abusive use of tax havens etc.

Date of Award	15 Feb 2012
Original language	English
Awarding Institution	City University of Hong Kong
Supervisor	Minkang GU (Supervisor) & Yun ZHAO (Supervisor)