The Study On The Behvior Of TNC's Transfer Pricing In China

The volume of utilization of foreign capital was over $50 billion in 2002. We became the first country which attracted most foreign capital in the world. FDI has become a necessary part of our economy. In 2004, the output value of FDI was 43% of our GDP, contributing a lot to our economy development. But we don't have corresponding laws for TNC. So it puts forward a lot of problems, one of which is transfer price.The paper, in the first place, introduces the theory of transferring price, and focuses on the analysis of transfer pricing in TNC'tax motivation, un-tax motivation and the pursuit of tax policy and investment environment. And then, based on the theory and in light of China's current legal environment and policy, the paper comes to such conclusions: tax motivation is unclear; the un-tax motivation is to evade the political risk, to avoid the exchange rate risk and to gain benefit illegally. Larger TNC prefer better investment environment, and the small ones prefer preferential tax policies. The latter is bad for our economy. In the last part, the paper analyzes the weak points in controlling the TNC'transfer pricing and comes up to the countermeasures. It offers some scientific ground to cope with the transnational enterprises'transfer pricing.