On Tax Planing Of China's Small-and-medium Enterprises

At present, the small and medium enterprises (SMEs) have become the important parts in the economy of China, and effect the improvement of economic growth, employment level, and so on. How to increase the profit of SMEs and develop their competitiveness will be the hot issue to scholars.For SMEs, tax is a cost that they must pay, and thus less tax expense equals to more net profit. As Chinese market economic system and the tax law system being better and better, the cost of tax evasion is growing. And tax planning is the best choice for SMEs to reduce their cost. While be limited by many reasons, the tax planning in our country is still very low. The research especially from the perspective of economics about tax planning of SMEs is also very little.This paper starts from the definitions of SMEs and tax planning, studying some articles about this subject, and seeing the status quo about tax planning of Chinese SMEs. To find out the main idea of this status quo that tax planning of our SMEs is very little, from the point of internal and external environment.On the internal environment, two models of game theory are adopted to analyze the tax planning. One is between SMEs. Get the Nash Equilibrium of pure strategy. From this game, it can be found out that if there are no other choices of reducing the tax burden, it is the best choice that choose tax planning, that is the motive that SMEs choose tax planning. And the other is the game between SMEs and the tax department. Get the Nash Equilibrium of mixed strategy. From this game, some inflections show that affect tax planning and find out the main reason that tax planning of SMEs is little.On the external environment, the cost-benefit model is used to analyze the tax environment of our country. In present tax environment, the expected proceeds of tax evasion for SMEs are greater than zero, which means SMEs are profitable for tax evasion. So tax evasion maybe substitute tax planning, and then it can be shown that the tax environment of present is not conductive to tax planning for SMEs in our country, which is another reason that tax planning of SMEs is little.On the above basis, some suggestion on how to improve the tax planning of SMEs from the point of internal and external environment is put forward. On the external environment, China should improve the tax law and tax system further, establish and improve tax planning agency mechanism and our government should give guide about tax planning. On the internal environment, SMEs should have a correct understanding of tax planning, and do something about the training of personnel and corporate accounting norms.