China to prevent foreign companies from avoiding tax

Chinese taxation authorities pledged to step up supervision of multinational companies on Monday in a campaign to crack down on tax avoidance.

Zhang Zhiyong, deputy director of the State Administration of Taxation, said China will comprehensively monitor the profit levels of foreign companies to make sure there is no "base erosion and profit shifting" (BEPS).

A company may erode a country's tax base by using a number of schemes to shift profits across borders, taking advantage of tax rates that are lower than in the country where they earn the profits.

"China will coordinate with other countries to clamp down on BEPS plotting and cross-border tax avoidance," said Zhang.

China is the world's largest destination for foreign direct investment and faces the challenge of varied tax avoidance techniques.

Last month in Brisbane, Chinese President Xi Jinping and other G20leaders promised further efforts to stop tax avoidance, including measures to modernize international tax rules, prevent cross-border tax evasion, and exchange information among member countries and with other countries.

Zhang said China will actively engage in global cooperation to fight BEPS activities and other tax avoidance schemes.