An empirical analysis of the changes in tax audit focus on international transfer pricing

Koon Hung CHAN, Wai Yee, Agnes LO, Lai Lan, Phyllis MO

Research output: Journal PublicationsJournal Article (refereed)peer-review

7 Citations (Scopus)


International transfer pricing is an important financial management mechanism allowing multinational corporations to maneuver funds internationally. The manipulation of reported profits often triggers investigations from tax authorities. With the increased globalization of economies and changes in the business environment, tax authorities in many countries have refined their enforcement of transfer pricing regulations. In this study, we use archival data in China to examine whether tax authorities have changed their focus on auditing multinational companies over the past two decades. Our results indicate that Chinese tax authorities have significantly reduced their focus on auditing wholly foreign-owned enterprises, and placed more focus on Western multinationals and larger companies in the late 2000s as compared with tax audits in the early 1990s. Tax audits in the late 2000s also focus on export-oriented and loss firms. The findings show that changes in the business environment, regulations and the audit expertise of tax officials can lead to a shift in the focus of tax audits of international transfer pricing.
Original languageEnglish
Pages (from-to)94-104
Number of pages11
JournalJournal of International Accounting, Auditing and Taxation
Publication statusPublished - 1 Jan 2015


  • Foreign investment enterprises; International transfer pricing; Tax audit focus


Dive into the research topics of 'An empirical analysis of the changes in tax audit focus on international transfer pricing'. Together they form a unique fingerprint.

Cite this