Globalization and U.S. Corporate Tax Policies: Evidence from Import Competition

2021 ◽  
Author(s):  
Tao Chen ◽  
Chen Lin ◽  
Xiang Shao
Keyword(s):  
Natural Experiment ◽  
Transfer Pricing ◽  
Manufacturing Firms ◽  
Import Competition ◽  
Tax Policies ◽  
Corporate Tax ◽  
Trade Relations ◽  
Trade Dispute ◽  
China Trade ◽  
Tax Reduction

This paper studies how globalization affects the corporate tax policies of U.S. manufacturing firms. Using U.S.-granting China Permanent Normal Trade Relations as a quasi-natural experiment, we find a significant increase in tax reduction activities for firms facing higher exposure to Chinese imports. The effect is more pronounced for firms with higher managerial slack. We also find that the effect is stronger for firms in less diversified products market and faster changing industries. We also show that U.S. firms facing higher Chinese import competition are more likely to engage in other tax-motivated activities: acquisition of subsidiaries in low-tax regions and suspected transfer pricing. Furthermore, we explore the 2017 tax cut and the recent U.S.-China trade dispute and find that firms engage less in tax reduction activities after the 2017 tax cut and after the tariff increase for Chinese imports. This paper was accepted by Kay Giesecke, finance.

scholarly journals Transfer Pricing As A Vehicle In Corporate Tax Avoidance

2016 ◽  
Vol 33 (1) ◽  
pp. 9-16 ◽  
Author(s):  
Joel Barker ◽  
Kwadwo Asare ◽  
Sharon Brickman
Keyword(s):  
Transfer Pricing ◽  
Tax Avoidance ◽  
Tax Rates ◽  
Corporate Tax ◽  
Internal Revenue ◽  
Tax Reduction ◽  
Arm’S Length Principle ◽  
Corporate Tax Rates ◽  
Foreign Affiliates ◽  
Regulatory Bodies

Using transfer pricing, U.S. Corporations are able to transfer revenues to foreign affiliates with a lower corporate tax rates.  The Internal Revenue Code requires intercompany transactions to comply with the “Arm’s Length Principle” in order to prevent tax avoidance.   We describe and use elaborate examples to explain how US companies exploit flexibility in the tax code to employ transfer pricing and related tax reduction and avoidance methods. We discuss recent responses by regulatory bodies.

Problem of Yuan Undervaluation in US-China Trade Relations

2012 ◽  
pp. 20-28
Author(s):  
A. Polivach
Keyword(s):  
Exchange Rate ◽  
National Currency ◽  
Chinese Government ◽  
Scientific Validity ◽  
Trade Relations ◽  
China Trade ◽  
The Us ◽  
World Economic ◽  
Us Dollar ◽  
World Economic Crisis

Before the world economic crisis the Chinese government restricted the sphere of the Yuan’s circulation exceptionally by the domestic market. Basically, until that time the Yuan was not freely convertible while the Chinese foreign trade transactions were operated with the help of the US dollar. This is a sufficient reason to state that the issue of Yuan’s underestimated exchange rate has no fundamental relevance. However, the crisis forced China to substantially extend the utilization of its national currency in the international settlements. This is especially true in case of mutual settlements with the neighbor countries. So far, presumably, the issue of Yuan’s underestimated exchange rate will, at last, receive a scientific validity only when the Chinese national currency will become fully convertible and the scales of its utilization will become comparable with those of the traditional hard currencies.

Main Characteristics of Vietnam–China Trade Relations, 2000–15

China Report ◽  
2017 ◽  
Vol 53 (3) ◽  
pp. 355-366
Author(s):  
Ngo Xuan Binh
Keyword(s):  
Data Analysis ◽  
Bilateral Trade ◽  
Trade Imbalance ◽  
Trade Relations ◽  
Export Structure ◽  
The North ◽  
China Trade ◽  
Key Characteristics ◽  
Import And Export ◽  
The Relationship

Entering the 21st century, trade relations between Vietnam and China have grown strongly, making positive contributions to the economic development of the two countries. However, the relationship in the period 2000–15 also witnessed a number of thorny issues such as a serious trade imbalance against Vietnam, the ‘North to South’ nature in the import and export structure of the two countries, Vietnam’s growing dependence on bilateral trade with China, and so on. These issues have affected negatively Vietnam’s economy. Based on data analysis, the author identifies the key characteristics of trade relations between Vietnam and China and highlights possible solutions for Vietnam to move its trade relations with China in a more balanced direction.

scholarly journals A Model for Companies to Overcome US–China Conflict on International Trade

2019 ◽  
Vol 5 ◽  
pp. 1
Author(s):  
Miguel Sousa ◽  
Maria J. Sousa ◽  
Rui Cruz ◽  
◽  
◽  
...  
Keyword(s):  
International Trade ◽  
Research Question ◽  
Main Research ◽  
Trade Relations ◽  
China Trade ◽  
Economic Forces ◽  
The Us ◽  
Physical Forces ◽  
The Government ◽  
Chinese Company

This article aims to study international trade specificity and the main activities of Chinese companies in US markets. It addresses the strategic tools of companies and their application in a global and very competitive market, framed by public policies and governments' strategies. It explores the principles of the internal and external environment of the countries. The main research question is: what are the dimensions of a model to potentiate the US–China Companies? The principal methodology used in this research was a literature review, and the analysis was based on the papers that research the theme US and China trade relations. The findings reflect that international trade is conditioned by the government politics, and there are several other obstacles that a US or Chinese company need to overcome: (a) economic forces; (b) technological forces; (c) political–legal forces; (d) sociocultural forces; and (e) physical forces.

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