This article considers the implications for China of the G20/OECD Base Erosion and Profit Shifting (BEPS) initiative and the international implications of China's BEPS measures. More specifically, the article examines China's transfer pricing, anti-treaty shopping and general anti-avoidance rules. It suggests that China is transforming itself from a taker of international norms to a shaker of such norms.Li notes that China is viewed as a victim of BEPS, that the phenomenon "highlights the unfairness in sharing the tax base between developed countries and developing countries," and that the OECD initiative is an opportunity for China to gain traction in global tax governance. From the conclusion:
China’s BEPS measures go beyond the scope of the BEPS initiative. ... China has high hopes on the outcomes of the BEPS initiative. At the same time, China appears to be realistic regarding what can be achieved at a global level. The BEPS initiative is not about redesigning the basic international tax rules and the system continues to be biased in favour of capital exporting countries (CEN), i.e. residence countries. The BEPS initiative is not designed to rethink the arm’s length principle to assign more value to productive activities and markets in both developing countries and developed countries. Instead, the BEPS initiative pursues the objective of attributing more profits to the jurisdiction where intangibles are generated, which are predominantly developed countries.
China has a high stake in the future of the international tax system, as it is both a major recipient of foreign direct investment (FDI) and a major source of outbound FDI. The BEPS initiative marks the beginning of a process that involves China. It is uncertain if the G20 and OECD member countries will be able to agree on the recommendations of the BEPS initiative and introduce the necessary legislative changes to initiate the reforms. It is even more uncertain as to the effect of the BEPS initiative on developing countries, in spite of the efforts of the UN Subcommittee and the DWG. However, to the extent that BEPS is shaking up the international tax norm, China is surely an active norm-shaker.