Project Details
Funding Scheme : Early Career Scheme
Project Number : 24611921
Project Title(English) : Taxation of the digitalised economy in China: challenges and proposals 
Project Title(Chinese) : 中國經濟數字化面臨的稅收問題:挑戰與應對 
Principal Investigator(English) : Prof Wang, Jingyi 
Principal Investigator(Chinese) :  
Department : Faculty of Law
Institution : The Chinese University of Hong Kong
Co - Investigator(s) :
Panel : Humanities, Social Sciences
Subject Area : Social and Behavioural Sciences
Exercise Year : 2021 / 22
Fund Approved : 424,000
Project Status : On-going
Completion Date : 31-12-2023
Abstract as per original application
The development of information and communications technology (ICT) has significantly changed how business is conducted. China has also undergone rapid digitalisation of its various economic sectors, but has not enacted any special digital tax rules in this respect. This research will attempt to identify a suitable taxation policy from the perspective of China. Digitalisation expands the reach of business operations far beyond national boundaries. Nevertheless, both digitalisation and globalisation confront national tax authorities with significant challenges. In regard to international taxation in particular, these challenges have been overwhelming, because the allocation of taxing rights on cross-border economic activity relies on an explicit physical connection between the taxable subject and the taxing jurisdiction. The difficulty of properly taxing multinational enterprises (MNEs) has been exacerbated by the increasingly digitalised economy. International organisations and individual states have therefore been forced to take action. The first part of the project will examine the current tax regime in relation to the digitalised economy, in particular cross-border businesses based in China from two perspectives, namely inbound and outbound digitalised economic activity. The business models reviewed include China-based enterprises investing in domestic and overseas e-commerce markets and foreign enterprises doing business in and with China. This indicates that the challenges in regard to taxation could be manifold, involving direct taxation (individual and enterprise income taxation) and indirect taxation (value-added tax, excise tax and so on). The goal is to establish what challenges the Chinese tax authorities face when attempting to tax digitalised economic activity. The second part of the research will use comparative legal analysis to investigate the special tax rules or proposals that have been adopted or suggested by international and regional organisations and individual jurisdictions to tackle the tax challenges posed by the digitalised economy. The comparison will focus on jurisdictions that share similarities with China in terms of the development level of the digitalised business sector. The analysis will consider the specific economic and taxation situation in the examined jurisdictions to analyse their perceived issues and countermeasures. Using the findings of the first two parts, the third part will consider how China could most efficiently and effectively tax the digitalised economy. The research aims to propose a suitable plan for the government to properly exercise its taxing power, at the same time complying with relevant international treaty obligations as well as maintaining the vitality of the domestic market and competitiveness of the digitalised industry.
Research Outcome
Layman's Summary of
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