The Impact Of Round-trip Capital On Corporate Income Tax Burden

As a large developing country,during the transformation process,affected by institutional and economic factors,the amount of return investment is huge,and the proportion of total foreign direct investment is already very high.From the statistics of the Ministry of Commerce,it can be seen that as of 2018,Hong Kong ranked first among the top 15 countries and regions for investment in China.In addition,non-traditional capital sources such as the British Virgin Islands and the Cayman Islands have also become the main sources of foreign investment in countries and regions.These places have one thing in common,they are all international tax havens.So why is there so much investment from tax havens?Where do these capitals come from?Tracking down the actual controllers or parent companies of companies registered in these tax havens is not difficult to find that most of the parent companies of these companies are Chinese companies.In fact,in recent years,most of China’s state-owned enterprises and private enterprises have basically realized capital transfer by setting up holding companies in tax havens,and then investing in tax havens back to China.So,will the use of return investment by companies affect the company?Will it reduce the corporate tax burden of enterprises?If it is possible to reduce corporate tax burden,what mechanism does it play?What economic consequences will it bring to the enterprise?These issues are worth exploring.Therefore,this article attempts to explore these issues from an empirical point of view in order to provide a reference for a deeper understanding of the definition and economic consequences of return investment.This article takes the companies which are listed on A shares,from 2004 to 2018 as a sample,and systematically examines the impact of return investment on corporate tax burden and the mechanism.This article found that:(1)About 2.8%of listed companies in China have made return investments.(2)There are two main mechanisms for return investment.One is thin capitalization and the other is adjusting the structure of R&D expenditures.The thin capitalization mechanism will increase the corporate income tax burden,while adjusting the R&D expenditure structure will reduce the corporate income tax burden.(3)The higher the intensity of regional tax collection and management,the less significant the negative impact of return investment on corporate tax burden.(4)Further,this paper studies the economic consequences and heterogeneity analysis of return investment,including the nature of property rights,regional differences and external supervision.From the perspective of listed companies,this paper studies the mechanism of return investment at the company level,which is helpful to understand and recognize return investment behavior,provides reference for tax authorities to supervise return investment behavior,and can provide a new thinking to a certain extent.