Research On The Tax Risk Management Of Small Low-profit Enterprises In Threshold Of Tax Preference Policy

The tax preference policy of small low-profit enterprises includes many kinds of taxes,such as enterprise income tax,value-added tax,urban construction tax,of which the most important one is enterprise income tax.This paper will concentrate in enterprise income tax as the research object.In the "enterprise income tax law of the People's Republic of China"",which is introduced in 2007,the tax reduction for small low-profit enterprises is established.That is,small low-profit enterprises can pay their income tax according to the preferential tax rate of 20%.In 2008,the global financial crisis reduced the development speed,government introduced more tax-reduction policies,and one of them is the upgraded version for small low-profit enterprise income tax reduction.In the recent years,the amount of tax reduction and number of preferential enterprises achieved a great increase.Since the preferential policy,good policy effect has played an active role in promoting economic development and increasing employment.In the administrative practice of small low-profit enterprises,the tax department actively promotes tax preferential policies,and simplifies the procedures for small low-profit enterprises.Compared with the administration mode of other tax concessions,the management of small low-profit enterprises tax preference policy is dominated by prior tax preference register.The register procedures are constantly simplified,from the initial needs to the tax hall for archival filing,to the directly register during the annual tax declaration.This administration mode mainly caused by two reasons.Firstly,the small low-profit enterprises are enormous and less taxable.Secondly,tax department lacks officers and big-data analyzing technology.In a word,the local tax bureau doesn't have enough resources to supervise the numerous small low-profit enterprises.After weighing the tax risk and administration cost,further administration is basically blank.The tax officers are hoping for a management method focusing on small low-profit enterprises.When the author works in XX local tax bureau,discovered the phenomenon that number of enterprises in threshold increasing abnormally.Through the preliminary investigation,it is found that the enterprises in threshold are generally in two cases,one is that the taxable income is just near the threshold,the second is the corresponding tax planning for tax preference policy.And in the real word,the second case accounts for the majority.Enterprises tax planning for their own interests within the scope of tax law is a normal and legal behavior.However,in practice,small low-profit enterprises have small size,less employees,relatively low management level.It means that,in the process of.tax planning,risk of the tax law violation is more possible than normal enterprises.Based on the demand of daily work,this paper hopes to find a way distinguish the enterprises with high tax risk from the others.In the tax risk management practice,the popular method is find the characteristics of tax risk.The unusual phenomenon in threshold provides opportunity to distinguish the risk.This paper uses the idea of distribution in earnings management theory to track the change of the abnormal number of enterprises in threshold.The empirical results show that the number of enterprises in threshold will change significantly consistent with the changes of the tax preferential policy.Suppose the enterprise with the abnormal change of taxable income is the enterprise of tax planning(ignoring the situation of taxable income is just in threshold),use the similarity of the taxable income distribution of different years,and then the number of tax planning enterprises in the interval can be calculated.Considering the tax administration cost,the management innovation must be subject to the human resources,working hours and working efficiency.We can design a way to determine a specific interval,in which there is relatively reasonable number of enterprises and high enough tax risk,to improve tax administration,and to reinforce the tax administration of small low-profit enterprises.If we put the enterprises in the specific interval under tax management,then the tax loophole caused by small low-profit enterprises tax reduction can be fulfilled.This paper makes a new attempt in the field of small low-profit enterprises tax risk management,fulfilling the blank of small low-profit enterprises management with balancing cost and gains.The research of this paper broadens the application of distribution in previous earnings management research,creatively uses the similarity of the distribution of taxable income in different years to calculate the number of abnormal enterprises,and enriches the research methods of earnings distribution for tax preference policy.