Taxation officials in China have vowed on Monday to strengthen their administration of taxes on multinational firms in a move to discourage tax evasion.
State Administration of Taxation deputy director Zhang Zhiyong said that China will be closely monitoring the profit and revenue levels of foreign firms to guarantee that there would be no "base erosion and profit shifting" (BEPS).
Companies can avoid paying taxes to a country by shifting their profits and revenues across different borders. Firms take advantage of this as some countries where they may shift their profits have lower taxes, resulting in higher revenues and less tax fees.
"China will coordinate with other countries to clamp down on BEPS plotting and cross-border tax avoidance," said the deputy director of China's taxation department.
With the largest consumer base and manpower resources, China has become the most preferred country for foreign direct investments. However, some multinational companies have been using different tax evasion methods.
During the Group of Twenty (G20) summit in Brisbane, President Xi Jinping and other leaders pledged to make more moves against tax evaders, including measures to exchange data among G20 nations and other countries, stop cross-border tax avoidance and to modernize global tax regulations.
Zhang said that China will be more active in cooperating with other countries in the ballet against BEPS activities and several other tax evasion techniques.
In late November, state-owned Xinhua News Agency reported that Microsoft might be paying about $140 million to China in back taxes. The Redmond-based tech firm is allegedly avoiding tax by shifting its profits to other borders.