China's taxation administration collected back 987 million yuan (US$136 million) of tax revenue in 2007, up 45 percent from a year ago, after investigating transfer pricing cases, a senior tax official said yesterday in Shanghai.

The State Administration of Taxation probed 192 cases on transfer pricing last year as part of its battle against enterprises not paying income tax. Of the cases probed, 173 were solved, said He Liantang, chief of SAT's international tax department during the China Tax Conference 2008 held by Deloitte.

Through the cases, the tax authority netted taxable income of 8.96 billion yuan.

"There will be more moves to improve the current system on anti-tax avoidance activities," he said, adding that more details will be released at an appropriate time.

China stepped up efforts to curb tax avoidance by companies under its new enterprises income tax which came into effect at the beginning of the year.

Under the new law, China has a level playing field where domestic and overseas companies pay the same corporate tax rate of 25 percent.

Transfer pricing, itself a neutral concept, is viewed by the tax authorities as a main means for companies to avoid tax payment by shifting profits to countries with a lower tax rate through cross-border related party transactions.

He said China is also working on a documentation requirement for cross-border related party transactions to curb tax avoidance.

The planned requirement is likely to include details such as a company's organizational structure and business nature.

(Shanghai Daily January 17, 2008)