Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/12087
Title: Tax holidays and tax noncompliance : an empirical study of corporate tax audits in China's developing economy
Authors: Chan, KH
Mo, PLL
Keywords: Tax holidays
Tax noncompliance
Corporate tau audits
Developing economy
Foreign investment enterprises (FIEs)
China
Issue Date: 2000
Publisher: American Accounting Association
Source: Accounting review, 2000, v. 75, no. 4, p. 469-484 How to cite?
Journal: Accounting review 
Abstract: Many developing economies use tax holidays to attract foreign investment by providing a limited period of tax exemptions and reductions for qualified investors. This paper investigates the effect of tax holidays on foreign investors' tax noncompliance behavior in China's developing economy. We measure noncompliance in terms of tax audit adjustments the Chinese tax authorities require in response to avoidance and evasion. The results indicate that a company's tax-holiday position affects noncompliance. Companies are least compliant before entering a tax holiday, and most compliant while in a tax-exemption period. In addition, domestic market-oriented companies, service-oriented companies, and joint ventures are less compliant than export-oriented companies, manufacturing-oriented companies, and wholly foreign-owned enterprises, respectively. Our evidence is relevant to policymakers designing tax incentives to attract foreign investors. Our evidence on noncompliance should also help tax authorities and field auditors plan more effective and efficient tax audits. In addition, the results should provide researchers an interesting perspective to study the effect of tax-rate incentives on corporate tax noncompliance.
Description: Annual Meeting of the American-Accounting-Association, San Diego, California, 1999
URI: http://hdl.handle.net/10397/12087
ISSN: 0001-4826
EISSN: 1558-7967
DOI: 10.2308/accr.2000.75.4.469
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