Foreign tax credits and the complexity of tax law : China as a case study

Resource Information

The work Foreign tax credits and the complexity of tax law : China as a case study represents a distinct intellectual or artistic creation found in International Bureau of Fiscal Documentation. This resource is a combination of several types including: Work, Language Material, Continuing Resources.

Label

Foreign tax credits and the complexity of tax law : China as a case study

Creator

• Xu, Y. (Yan)

Subject

• credit method
• foreign tax credit
• tax law
• tax sparing credit

Language

eng

Summary

A foreign tax credit system is a commonly adopted unilateral mechanism to reduce double taxation for resident taxpayers in many tax systems. It is also an internationally recognised means to eliminate double taxation in model tax conventions. The mechanism was first introduced in the United States in the early 1910s and has since undergone a number of important changes in the US tax law system. Subsequent to its initial adoption in the United States, many jurisdictions have introduced this mechanism to their domestic tax laws. The relevant rules determining which taxes can be credited against a home country tax liability and limitations on the amount of a credit the taxpayer can claim have become increasingly complex in many jurisdictions. The complexity arises largely due to attempts to balance a variety of competing objectives such as capital export neutrality, protection of the domestic tax base and fairness in taxing resident taxpayers. Is this complexity necessary? This article uses China as a case study to explore this question. It argues that although the Chinese foreign tax credit system has been improved compared with the previous system, the lack of clear definitions on some key terms and the ambiguity of technical details still leave confusion and unnecessary complexity for taxpayers. Reform of the already complicated system is needed to improve legal certainty and clarity. However, reform is highly likely to increase tax complexity, which thwarts the desired overall goals. Any further improvement needs to be carefully considered to avoid unnecessary complexity being added to tax administration and compliance

Citation source

In: Australian tax review. - Pyrmont. - Vol. 46 (2017), no. 2 ; p. 120-136

Geographic coverage

Asia

Language note

English