Foreign Ownership Networks, Corporate Tax Avoidance and Effective Tax Burden
YANG Lianxing, WANG Qiushuo, ZHANG Zhi, ZHAN Zhimin
School of Economics and Management & Institute of China Free Trade Strategy Research, East China Normal University; School of Economics, Fudan University; School of Economics, Southwestern University of Finance and Economics
摘要 作为联结双循环的关键枢纽,外资网络对于“稳资提质”具有重要作用。本文基于2013—2020年全国企业税收调查数据与Bureau van Dijik数据库,从外资股权关联视角检验外资网络对企业实际税负的影响,研究表明外资网络对企业税负存在显著抑制作用。机制分析表明,外资网络通过提高企业避税动机和避税能力降低企业实际税负。从避税动机来看,外资网络能够缓解母子公司间委托代理冲突、降低企业交易费用,促使关联企业更积极地实施转移定价和利润调整策略。从避税能力来看,外资网络增强企业商业信用融资能力、优化税收专有知识配置,进而提高企业供应链议价能力和税负转嫁效率。进一步分析表明,外资网络中心度提升对位于供应链上游企业或大中型企业税负的抑制效应更显著。此外,企业借助外资交叉持股形成的股权网络能够内生创造税收优惠,促进企业财务绩效优化,有助于吸引高质量外资流入。本文为全球税改浪潮下更好地利用外资网络优化产业布局,畅通双循环,制定高质量外资引进政策提供了有益参考。
Summary:
In recent years, the global environment for foreign direct investment (FDI) has become increasingly complex. On the one hand, intensified tax competition and international reforms, most notably the global minimum tax, have limited the scope for multinationals to shift profits to low-tax jurisdictions. On the other hand, emerging economies continue to seek high-quality FDI as a means of upgrading industrial structures and integrating more deeply into global value chains. China presents a particularly interesting case: despite unifying corporate income tax rates for domestic and foreign enterprises, it remained the world's second-largest FDI destination in 2023. This phenomenon suggests that the role of foreign ownership networks, forged through cross-shareholding structures, is central to understanding how external uncertainties are mitigated and how firms adapt their tax planning strategies in a changing international environment. At the domestic level, institutional frictions in China's tax incentive system persist. Approval processes remain complex, tax authorities retain broad discretion, and firms often face information asymmetries in accessing preferential policies. Moreover, regional tax competition has exacerbated the uneven allocation of capital and widened disparities in effective tax burdens. These challenges highlight the need for a more comprehensive framework to assess how foreign ownership networks influence corporate taxation outcomes. This paper addresses the limitations of existing research, which often relies upon incomplete indicators of tax burden and pays insufficient attention to firm-level mechanisms, particularly among small and medium-sized enterprises (SMEs). We combine China's National Enterprise Tax Survey (2013-2020), which covers a broad spectrum of firms, including micro and small enterprises, with ownership data from the Bureau van Dijk Orbis database. By constructing refined measures of effective corporate tax burden and developing indicators of foreign ownership networks, such as network embedding and degree centrality, we provide a systematic examination of the relationship between network participation and firms' effective tax burden. Furthermore, by distinguishing between tax motivation and tax capacity, we uncover the channels through which foreign capital linkages affect firms' tax outcomes. The study makes three major contributions. First, it introduces a macro-open economy perspective to explain persistent heterogeneity in effective tax burdens across firms, especially non-listed and smaller enterprises, which traditional datasets and theories have struggled to account for. Second, it advances the measurement of foreign ownership by capturing overlapping, interdependent equity linkages that reflect the complex nature of capital networks, thus reducing biases associated with conventional FDI proxies. Third, it offers policy-relevant insights, showing how institutional barriers in the current tax regime hinder the attraction and upgrading of FDI quality, while also suggesting how policy tools can be redesigned to remain effective under the global tax reform wave. Empirical analysis provides strong evidence in support of these arguments. First, embedding in foreign ownership networks significantly reduces firms' effective tax burden, with the effect driven by endogenous advantages generated within the network rather than parent company size or exogenous preferential policies. Second, the reduction in tax burden functions through two distinct channels: stronger motivation to engage in tax optimization and enhanced capacity to implement tax planning strategies. These effects are especially pronounced among upstream firms and medium-to-large enterprises. Third, participation in foreign ownership networks not only lowers tax burdens but also improves firm performance, strengthens long-term value creation, and indirectly enhances the host country's attractiveness for high-quality FDI inflows. The findings carry clear policy implications. Policymakers should prioritize attracting foreign investors with extensive network linkages and nurturing hub enterprises within these networks. At the same time, tax authorities should reinforce cross-border monitoring of tax sources, leverage big data and blockchain technologies to identify profit-shifting activities, and implement risk-based classification to allocate enforcement resources more efficiently. Simplified cross-border VAT procedures, automated preferential policy matching, and accelerated rebates for foreign affiliates engaged in technology transfer would further reduce compliance costs and strengthen innovation incentives. By linking foreign ownership networks to effective tax burdens, this paper contributes to a more comprehensive understanding of corporate taxation in the era of global tax reform. It also provides concrete pathways for emerging economies to stabilize FDI inflows, upgrade FDI quality, and integrate more effectively into global industrial and financial networks.
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