Abstract
Taxation is a significant cost borne by firms, which affects firms’ decision-making behavior regarding the available choices on the magnitude and structure of output, disposal of net profit, direction of capital investment, among many other things. Thus, reducing the corporate tax burden has become a powerful motivational force in corporate conduct. Indeed, corporate tax management has emerged as an important financial strategy desired by shareholders to improve firm value. Expert accountants are hired by corporations for this purpose.
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Notes
- 1.
There are 31 provinces in the mainland China, which includes 22 provinces, 5 autonomous regions (Tibet autonomous Region, Xinjiang Uygur Autonomous Region, Guangxi Zhuang autonomous region, Inner Mongolia autonomous region, Ningxia Hui Autonomous Region), and 4 directly administered municipalities (Beijing, Tianjin, Shanghai, and Chongqing).
- 2.
In 2003, “Interim Regulations on Supervision and Management of State-owned Assets of Enterprises” are promulgated by the China State Council Article and states that “the state-owned assets supervision and administration authority shall establish a system for evaluating the performance of the responsible persons of enterprises, sign performance contracts with the responsible persons of enterprises appointed by it, and conduct annual and office-term evaluation of the responsible persons according to the performance contract”. And in 2009, the government issued the regulations on top managers’ pay of state enterprises. The cash compensation of a top manager in an SOE includes three parts: a bases salary, a performance-based bonus, and an incentive income, while the performance-based bonus is flexible and varying based on the firm performance.
- 3.
During the fifth Session of the tenth National People’s Congress (NPC) on March 16, 2007, the new Corporate Income Tax Law was approved and became effective on January 1, 2008. The new tax law set a unified tax rate of 25% for both domestic companies and foreign invested companies, and changed the current tax holiday, preferential tax treatments, and transitional provisions. Under the previous tax law, domestic companies had been assessed at a 33% statutory income tax rate; while certain foreign companies enjoyed preferential tax rates of 24% or 15%. To mitigate the effect of new Corporate Income Tax Law, the sampling in this chapter began in 2008.
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Zhang, C., Rasiah, R., Cheong, K.C. (2019). Economic Reforms and Market Outcomes over Time. In: Governing Corporate Tax Management. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-13-9829-2_4
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