The Economic Outcome Of Chinese Listed Companies' Investment In Tax Havens

China's Outward Foreign Direct Investment has growing constantly and rapidly during the past several years.However,a significant part of that has flow into areas called tax havens.Statistical data shows that,in the year 2002,only about 6%of China's listed companies have direct invested in tax havens,but that percent became over 30%in 2016.Almost zero tax rates and strict information protection are well-known characteristics of tax havens,and that make tax avoidance become the most common purpose of direct investments in tax havens.Oversea tax avoidance of multinationals can cause problems like tax base erosion and unfair competition environment,and have already arouse concerns by governments and international organizations like OECD.Chinese government has pay high attention to the problem of oversea tax avoidance and keeps making perfect the tax laws and regulations.Also,the government has sign several tax information exchange agreements with other countries(areas).Under the background that tax havens have received much concerns.foreign academics have paid high attention on tax havens and have already made some meaningful researches.Recent literatures are mainly concentrated on tax havens'invest motivation,tax avoidance,base erosion and governance mechanism.However,under this background,fewer Chinese researches have concerned about Chinese companies tax haven investment,which is practical meaningful.Only a few empirical researches have paid attention to tax havens and the existing ones mostly cares about profit shifting and tax avoidanceUsing the data of firms listed in Chinese A-share market during 2002 to 2016,this paper empirically tests how listed companies make use of tax havens and how tax enforcement play a role in containing oversea tax avoidance.The results show that:(1)Listed companies'direct invest in tax havens significantly promote the degree of tax avoidance and related party transaction is an important mechanism that tax havens direct investment help to avoid the tax fee.And enhance the tax enforcement can restrain companies make use of tax havens direct investment to avoid legal tax fee and can also lower the willingness that companies'tax havens direct investment.Also tax enforcement can effectively restrain related party transaction.(2)Due to the lower information transparency,direct invest in tax havens can significantly improve the probability to receive non-standard audit opinions and Tax Information Exchange Agreement,high attention of analysts and management ownership of stock can somehow release this relation.(3)Companies' that direct invest in tax havens can enjoy lower cost of debt.Given that oversea tax avoidance can help companies get some advantages,which is unfair,in competition,the lower cost of debt actually enhance the unfair market competition.This paper enriches the literature of tax havens and provides important implications in practice.First,we fulfill the researches about tax havens direct investment and tax enforcement.On the other hand,through the discussion of how does tax enforcement restrain companies'tax avoidance by tax havens direct investment,this paper expand the boundary of tax enforcement's research and can also help us to have a comprehensive understanding about tax enforcement.Second,this research promotes researches about audit opinions and cost of debt.We discuss tax havens direct investment,audit opinion or cost of debt in a whole system.And we found that on the one hand,we found the mechanism that direct invest in tax havens affect audit opinions and found out that direct invest in tax havens may lower the information transparency which help us to further understand the influence factor of audit opinions.On the other hand,we found that direct invest in tax havens can lower cost of debt which may harm the market environmentOur research can provide some inspiring for restrain the use of tax havens in practice and can offer some useful reference for relevant policy.Regulatory authorities should review the direct invest in tax havens more strictly and should also enhance the supervision about business and financial dealings between listed companies and the tax havens direct investments.Since Tax Information Exchange Agreements is useful,the international cooperation and information exchange should also be strengthened.The auditor should also pay more attention to companies' direct invest in tax havens and be more careful to offer non-standard audit opinions.Finally,in order to make the decision policy more scientific,investors should also be more careful about listed companies' invest in tax havens.