University of New South Wales Faculty of Law Research Series

Series Home | UNSW Law Home Page

University of New South Wales Faculty of Law Research Series 2009

 

The Economic Benefits of the Use of Guanxi and Business Networks in a Jurisdiction with Strong Formal Institutions: Minimisation of Taxation

Nolan Cormac Sharkey, University of New South Wales

Article comments

This paper was published in the eJournal of Tax Research (2008) vol. 6, no. 1, pp. 45-66. This paper may also be referenced as [2009] UNSWLRS 26.

Abstract

Why rely on informal institutions when conducting business? Because it leads to a greater economic return. The current academic status quo on the use of guanxi and business networks by Chinese entrepreneurs in both China, South East Asia and beyond is that it is a response to the weak formal institutional environment . It is argued that weak institutional environments create an economic rationale for the use of guanxi and business networks. From this base, it is further asserted that the use of guanxi and business networks will reduce and disappear with the strengthening of formal institutions in China and other jurisdictions. This paper will challenge this latter assertion by arguing that there are strong economic benefits to those that are able to operate through guanxi and business networks in a jurisdiction with strong formal institutions. The primary benefit that will be examined is the reduction or elimination of business taxation which is a very significant issue in most jurisdictions with strong institutional environments. This paper will demonstrate how guanxi and business networks can be used to avoid taxation in the strong formal institutional environment such as that represented by Australia.

Subject Area

Taxation

Recommended Citation

Nolan Cormac Sharkey, "The Economic Benefits of the Use of Guanxi and Business Networks in a Jurisdiction with Strong Formal Institutions: Minimisation of Taxation" (August 2009). University of New South Wales Faculty of Law Research Series. University of New South Wales Faculty of Law Research Series 2009. Working Paper 26.
http://law.bepress.com/unswwps/flrps09/art26

No readers' reactions have been posted for this article. To submit one, copy the URL for this article (http://law.bepress.com/unswwps/flrps09/art26) and click here.