A Comparative Study of Transfer Pricing Taxation System between China and Australia

Abstract

As defined, transfer pricing is the setting of price for goods and services or intangible assets sold between related entities within an enterprise. In international economic activities, international companies could shift transfer pricing in order to achieve best profit in a way setting major profit into an entity within a country which has relatively lower tax rate. Under economic globalization, international business contributed enormously in the growth of global economy, which explains why transfer pricing has growing concern among policy makers all around the world. Currently, we have already founded a relatively complete transfer pricing taxation policies, and empirically developed for decades. However, as we are in our ‘starter’ period, there are still huge gap between us and developed countries. Recent data shows that we had experienced extraordinary tax loss on transfer pricing at RMB 30 billion in financial year 2012-2013. Meanwhile, Australia, where china imports most of ores and wools from and exports technique products and textile to, these two country have had an integral business relationship and relies on each other. This article would basically compare transfer pricing in these two countries and would come up with approaches in approving transfer pricing taxation policies in China