Tax Avoidance Developed By Multinational Enterprises Essay

1281 Words Jan 12th, 2016 6 Pages
Several tax strategies included in tax-planning in order operating businesses and conducting transactions to be defined in ways that MNEs will be able to minimize the aggregate of taxes paid for their worldwide activities.The methods for tax avoidance developed by multinational enterprises are known in developed countries and focused, in general, on the shifting their profits from high to low tax jurisdictions. Equity contribution to a subsidiary is the first step in order the profits of MNEs to be removed out of a high tax jurisdiction. In practice, the parent company contributes an amount of money to low-tax or tax heavens affiliate, which invest this amount with rate of return, the amount of derived from rate of return has successfully shifted out of the parent company’s high tax jurisdiction. Strategies include the distortion of intra-firm transfer prices, the distortion of the corporate debt-equity structure, the transfer pricing of intellectual property and the development of hybrid entities. One of the most common used method is considered the profit shifting through subsidiaries in different tax jurisdictions.According to the tree corporate structure of MNEs, the parent (holding) company is located in a country while it has operating subsidiaries in several countries, which generate profits remitted to the parent company with form of dividends. In the same time, this company, trying to benefit from the favourable tax treatment in other countries, has created non-…

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