Profit Shifting of FDI in China—From the Perspective of Corporate Control Rights
The cross-border profits shifting by FDI(foreign direct investment)has led to a loss of China's tax base.The existing research has mainly focused on OFDI(outward foreign direct investment),paying insufficient attention to FDI.Matching the 2002-2007 Annual Survey of Industrial Firms Dataset with FDI Information,we find that foreign invested firms does shift profit out in order to avoid tax:a one percentage point increase in the income tax rate difference between China and home country corresponds to 1.1％higher profit shifting.We further analyze the impact of control rights of foreign ownership and con-firms its important role.This study enhances our understanding of international tax avoidance from the perspective of corporate control rights.
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