Journal articles: 'Multinational Tax'

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Považanová, Kristína, and Hana Kováčiková. "Multinational tax avoidance vs. European Comission." Bratislava Law Review 1, no. 1 (October 1, 2017): 133–41. http://dx.doi.org/10.46282/blr.2017.1.1.63.

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This paper deals with recent actions of the Commission with respect to EU State Aid rules. The Commission is looking at the compliance with EU State Aid rules of certain tax practices in some Member States in the context of aggressive tax planning by multinationals, with a view to ensure a level playing field. A number of multinational companies are using tax planning strategies to reduce their global tax burden, by taking advantage of the technicalities of tax systems, and substantially reducing their tax liabilities. This aggressive tax planning practice erodes the tax bases of Member States, which are already financially constrained.

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Bustos, Sebastián, Dina Pomeranz, José Vila-Belda, and Gabriel Zucman. "Challenges of Monitoring Tax Compliance by Multinational Firms: Evidence from Chile." AEA Papers and Proceedings 109 (May 1, 2019): 500–505. http://dx.doi.org/10.1257/pandp.20191045.

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This paper reviews common challenges of taxing multinational firms, using Chile as a case study. We briefly describe key international tax avoidance methods: profit shifting to low-tax jurisdictions through transfer pricing and debt shifting. We discuss the prevalent policy to tax multinationals--the arm's length principle--and alternative proposals using apportionment formulas. Novel data from Chile show that multinationals make up a large share of GDP but report lower profit and effective tax rates than local firms. In 2011, Chile implemented a reform following OECD guidelines to enforce the arm's length principle. We discuss potential effects on tax collection and welfare.

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Snel, Freek PJ. "What Is Wrong with (The Rules of) the Game?" Intertax 41, Issue 11 (November 1, 2013): 614–20. http://dx.doi.org/10.54648/taxi2013059.

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Public outrage is growing about 'immoral tax evasion by multinationals'. This calls for a thorough and polemical response from the tax advisory profession. This article investigates the following questions: 'can we define the boundaries to "ethical tax planning"; "is the Netherlands a tax haven"; "what are the fundamental reasons multinationals can pay little tax without acting illegally"; and "how can we really improve the rules of the game"?' The growing criticism with respect to tax evasion by multinational companies is understandable. But, if one takes a closer look, this criticism is largely unjustified. The author concludes that we cannot ask more from multinationals than paying tax in accordance with the law and in a balanced relation to the value of the benefits they derive from government services. The rules of the game can be improved with respect to the relation to the benefits from government services. In the author's view, this requires replacing the arm's-length principle for the allocation of profits to countries by a more robust approach. It requires the recognition by governments that there is a clear limit to what they can ask from multinational companies and what not.

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Kohlhase, Saskia, and Jochen Pierk. "The effect of a worldwide tax system on tax management of foreign subsidiaries." Journal of International Business Studies 51, no. 8 (December 2, 2019): 1312–30. http://dx.doi.org/10.1057/s41267-019-00287-9.

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AbstractUnder a worldwide tax system, firms pay taxes on their domestic income and repatriated foreign income, whereas under a territorial tax system repatriated foreign income is exempt from taxation. We examine whether worldwide tax systems reduce the incentives of multinational corporations to engage in tax management in their foreign subsidiaries. Using two quasi-natural experiments, we show that multinationals lower the effective tax rates in their foreign subsidiaries after countries switch from a worldwide to a territorial tax system. Thus, multinationals subject to a worldwide tax system face competitive disadvantages compared to competitors from countries with a territorial tax system.

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Matsuoka, Akira. "Remember the balance of forces." Journal of Financial Crime 27, no. 4 (January 29, 2020): 1379–88. http://dx.doi.org/10.1108/jfc-09-2019-0119.

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Purpose The purpose of this paper is to warn policymakers, by examining certain aspects of policy, possibly overlooked, against overestimating the power of corporate social responsibility (CSR) idea to inhibit tax avoidance by the multinationals. Design/methodology/approach By examining, with narrative and qualitative means, existing insights such as ones with regard to the inefficiency of the public sector. Findings Implication that the following three factors could not co-exist: promoting CSR activities, which include moral tax payment by the multinational corporations; requiring the multinationals to refrain from immorally reducing effective tax rates and keeping the current level of public utilities. Originality/value To sound an alarm to tax policymakers who are particularly addicted to the base erosion and profit shifting by multinational enterprises recently by this new implication mixing up with existing findings with regard to the CSR idea and cost-inefficiency character of the public sector activities.

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Polezharova, L. V., M. A. Goncharenko, and A. V. Gryechishkin. "International tax models towards multinational companies from the perspective of national welfare." Revista de la Universidad del Zulia 11, no. 29 (February 8, 2020): 337–66. http://dx.doi.org/10.46925//rdluz.29.22.

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The article is dedicated to the development of mathematical models to solve the real scientific task of supporting tax policies for counter-acting tax planning of multinational companies (MNCs) that are working in the field of production and engineering, forming the scheme international prosecutor, from the position of national welfare. Based on the analysis of the existing models of international taxes and on the peculiarities of the real mechanism of tax regulation of capital movement, new models have been developed with a balance orientation. The main points for this balance are: a) an approach aimed at determining the final results of international taxation from the perspective of national economies; b) Take as an example the gap between tax planning measures by multinationals and measures contrary to government tax planning. The approval of models with the case study of the multi-level structure in which, to counteract the tax planning of multinational companies, the Government uses rules of controlled transactions, demonstrated that due to the possibility of development of multinational companies in convenient and extraterritorial jurisdictions, for Government the final result of the application of these rules can be negative. Instead of additional income, you risk reducing the tax base and reducing budget income; And from the perspective of national welfare, this implies losing the income and capital of multinational companies. It is considered important that the rules for the taxation of multinational companies should not focus on taxes as such, but should encourage the maintenance of capital within the territory or facilitate the return of previously disinvested income.

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Clausing, Kimberly A. "Multinational Firm Tax Avoidance and Tax Policy." National Tax Journal 62, no. 4 (December 2009): 703–25. http://dx.doi.org/10.17310/ntj.2009.4.06.

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Cristea, Anca D., and Daniel X. Nguyen. "Transfer Pricing by Multinational Firms: New Evidence from Foreign Firm Ownerships." American Economic Journal: Economic Policy 8, no. 3 (August 1, 2016): 170–202. http://dx.doi.org/10.1257/pol.20130407.

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Using a firm-level dataset of Danish exports between 1999–2006, we find robust evidence for profit shifting by multinational corporations. Our triple difference estimations exploit the response of export unit values to acquisitions of foreign affiliates and to changes in statutory corporate tax rates. This identification strategy corrects for a downward bias resulting from firms adjusting arm's length prices to obscure transfer price manipulations. We find that Danish multinationals reduce the unit values of their exports to low tax countries between 5.7 to 9.1 percent. This difference corresponds to a tax revenue loss of 3.24 percent of Danish multinationals' tax returns. (JEL D21, D22, F14, F23, H25, H32)

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Liu, Li. "Where Does Multinational Investment Go with Territorial Taxation? Evidence from the United Kingdom." American Economic Journal: Economic Policy 12, no. 1 (February 1, 2020): 325–58. http://dx.doi.org/10.1257/pol.20180592.

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In 2009, the United Kingdom changed from a worldwide to a territorial tax system, abolishing dividend taxes on foreign repatriation from many low-tax countries. This paper assesses the causal effect of territorial taxation on real investments, using a unique dataset for multinational affiliates in 27 European countries and employing the difference-in-differences approach. It finds that the territorial reform has increased the investment rate of UK multinationals by 16.7 percentage points in low-tax countries. In the absence of any significant investment reduction elsewhere, the findings represent a likely increase in total outbound investment by UK multinationals. (JEL F23, G31, H25, H32, H87)

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Gumpert, Anna, James R. Hines, and Monika Schnitzer. "Multinational Firms and Tax Havens." Review of Economics and Statistics 98, no. 4 (October 2016): 713–27. http://dx.doi.org/10.1162/rest_a_00591.

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11

Strobel, Caroline D. "Tax Proposals for Multinational Enterprises." Journal of Corporate Accounting & Finance 26, no. 6 (August 11, 2015): 107–9. http://dx.doi.org/10.1002/jcaf.22088.

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Becker, Johannes, and Nadine Riedel. "Multinational firms mitigate tax competition." Economics Letters 118, no. 2 (February 2013): 404–6. http://dx.doi.org/10.1016/j.econlet.2012.11.035.

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Egger, Peter, Christian Keuschnigg, Valeria Merlo, and Georg Wamser. "Corporate Taxes and Internal Borrowing within Multinational Firms." American Economic Journal: Economic Policy 6, no. 2 (May 1, 2014): 54–93. http://dx.doi.org/10.1257/pol.6.2.54.

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This study develops a theoretical model of a multinational firm with an internal capital market. Hypotheses regarding the role of local versus foreign characteristics such as profit tax rates, lack of institutional quality, financial underdevelopment, and productivity for internal debt financing at the level of foreign affiliates are derived and assessed empirically in a panel dataset covering the universe of German multinationals. We show that differences in nontax incentives given by fundamentals in local and foreign markets can offset or reinforce tax incentives. The results point at a many times higher tax-sensitivity of internal debt financing compared to previous research. (JEL F23, G32, H25)

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Hananto, Hari. "PENGARUH KARAKTERISTIK MULTINASIONALITAS DAN THIN CAPITALISATION TERHADAP EFFECTIVE TAX RATE." Akuntansi dan Teknologi Informasi 14, no. 2 (February 10, 2022): 87–101. http://dx.doi.org/10.24123/jati.v14i2.4869.

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The company always tries to minimize tax payments through various ways. In particular, a multinational company, has more ability to do tax avoidance. One technique that can be used by multinational corporations is to transfer corporate income from one jurisdiction to another that has a lower corporate income tax rate to minimize overall group tax payments (PWC, 2011). This mechanism can result in superior tax payments for multinational companies that have subsidiaries or affiliated companies (Klassen & Laplante, 2012; Dyreng & Lyndsey, 2009). In addition to income transfer, multinational companies can also regulate their capital composition in order to take advantage of the ease of obtaining capital in a jurisdiction. This study aims to show empirical evidence about the effect of the nature of multinationality (multinational companies) and the existence of capitalization (thin capitalization) on the possibility of tax avoidance. The population sample used in this study were companies listed on the IDX during the 2017-2019 period. The results show that multinational companies have an effect on increasing tax avoidance efforts. Meanwhile, thin capitalization has no effect on efforts to increase tax avoidance.

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Autrey, Romana L., and Francesco Bova. "Gray Markets and Multinational Transfer Pricing." Accounting Review 87, no. 2 (November 1, 2011): 393–421. http://dx.doi.org/10.2308/accr-10199.

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ABSTRACT Gray markets arise when a manufacturer's products are sold outside of its authorized channels, for instance when goods designated by a multinational firm for sale in a foreign market are resold domestically. One method multinationals use to combat gray markets is to increase transfer prices to foreign subsidiaries in order to increase the gray market's cost base. We illustrate that, when a gray market competitor exists, the optimal transfer price to a foreign subsidiary exceeds marginal cost and is decreasing in the competitiveness of the domestic market. However, a multinational's discretion in setting transfer prices may be limited by mandatory arm's length transfer pricing rules. Provided gray markets exist, we characterize when mandating arm's length transfer pricing lowers domestic social welfare relative to unrestricted transfer pricing. We also demonstrate that gray markets can lead to higher domestic tax revenues, even when gray market firms do not pay taxes domestically.

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Hopland, Arnt O., Petro Lisowsky, Mohammed Mardan, and Dirk Schindler. "Flexibility in Income Shifting under Losses." Accounting Review 93, no. 3 (September 1, 2017): 163–83. http://dx.doi.org/10.2308/accr-51907.

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ABSTRACT This study examines the flexibility of multinational firms to adjust their income-shifting strategies—whether using transfer pricing or internal debt—during the tax year to react to affiliates' operating losses. We develop the concept that under flexibility, multinationals can adjust their inter-affiliate payments ex post (i.e., after financial outcomes are revealed, but before the end of the tax year) to minimize worldwide tax payments. Without flexibility, multinationals must commit to their affiliates' income-shifting strategies ex ante (i.e., before financial outcomes are revealed). Our central prediction is that under ex post income shifting, loss affiliates report lower transfer prices and internal leverage than profitable affiliates; under ex ante income shifting, affiliates report the same transfer prices and internal capital structure, regardless of making losses. Using novel data on direct transfer payments and internal debt of Norwegian affiliates, we find empirical evidence that transfer pricing, particularly related to user fees, but not internal debt, provides flexibility to adjust income shifting ex post. In additional tests, we confirm that our results reflect flexibility rather than loss affiliates' poor performance. Our study should interest tax policymakers and researchers by identifying how various mechanisms allow multinational firms to shift income when they face losses. JEL Classifications: F23; H25; H87.

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Masri, Indah. "International Tax Avoidance Practice in ASEAN-4 Multinational Company." International Journal of Business Review (The Jobs Review) 4, no. 2 (December 1, 2021): 141–54. http://dx.doi.org/10.17509/tjr.v4i2.40522.

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This study held an evaluation on the role of Tax Risk Management and Government Governance in accordance with international tax practice with tax avoidance. This study uses panel data from year 2010 to 2016 of multinational companies in 4 ASEAN countries namely Indonesia, Malaysia, Singapore, and Philipines as samples. The study result proves that Tax Risk Management and Government Governance successfully decrease international tax avoidance practice in multinational companies in ASEAN especially on Thin capitalization and multinational practice. It means the company performing internal supervision by having task risk management and a better government governance can minimize the negative impact of international tax avoidance practice. Meanwhile, tax havens practice is not significantly influenced since some samples of this study are multinational companies in tax haven country namely, Singapore and Labuan Malaysia. Therefore, the role of task risk management and government governance is not too significant.

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Russell, A. M., C. A. Martini, and J. A. Rickard. "Welfare optimization and multinational monopolies." Journal of the Australian Mathematical Society. Series B. Applied Mathematics 38, no. 1 (July 1996): 16–25. http://dx.doi.org/10.1017/s0334270000000448.

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AbstractThis paper examines the role of import tariffs and consumption taxes when a product is supplied to a domestic market by a foreign monopoly via a subsidiary. It is assumed that there is no competition in the domestic market from internal suppliers. The home country is able to levy a profits tax on the subsidiary. The objective of our analysis is to determine the mix of tariff and consumption tax which simultaneously maximizes national welfare. We show that national welfare does not have an internal maximum, but attains its maximum on a boundary of the consumption tax–tariff parameter space. Furthermore, the optimal value of national welfare increases as the tariff decreases and the consumption tax increases. The results obtained generalize the results of an earlier paper in which national welfare was maximized with respect to either a tariff or consumption tax, but not both.

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Masri, Indah. "Tax Avoidance and Tax Risk Management Impacts on Earnings Response Coefficient." International Journal of Business Review (The Jobs Review) 3, no. 2 (December 7, 2020): 87–96. http://dx.doi.org/10.17509/tjr.v3i2.30165.

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This research aims to analyse tax risk management role as a moderating variable in tax avoidance relationships with the earnings response coefficient. The research usesall samples of the non financial multinational companies on Indonesian and Malaysian stock exchanges. The outcome is tax risk management can strengthen the positive effect of tax avoidance on Earnings Response Coefficient. This proves that the tax risk management can be the control from the multinational corporations in handling tax avoidance. Companies that accomplish improved tax risk management can increase pre-tax income transparency that they present, thereby increasing earnings informativeness (ERC).

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Zhao, Ziyan. "Legal Difficulties of China's Anti-tax avoidance Measures and solutions." BCP Business & Management 20 (June 28, 2022): 789–96. http://dx.doi.org/10.54691/bcpbm.v20i.1064.

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With the further advancement of economic globalization, multinational corporations contribute more and more to the global economic development nowadays. At the same time, the tax avoidance of multinational corporations has attracted more and more attention from various countries. At present, Chinese domestic scholars have different opinions on the tax avoidance identification standards and proof responsibility in China. Foreign scholars have certain research on the reasons, methods, identification standards and proof responsibility of tax avoidance of multinational corporations. Tax avoidance of multinational corporations has a negative impact on the economic development of various countries. It creates an unfair market environment. This paper is divided into four parts. At present, there are difficulties in the implementation of laws and regulations of anti-tax avoidance measures. China’s anti-tax avoidance legislation is not perfect. The rigidity of the system implementation is also insufficient. The reasons behind these problems are the for-profit nature of multinational corporations and the different economic systems of different countries. Based on this, this paper tries to solve the problems above by putting forward the corresponding strategies from the legal level and the system level. This paper uses comparative literature analysis method, comparative analysis method and learn from foreign advanced experience. The aim of the paper is contributing to the current research on tax avoidance behavior of multinational companies.

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Eriotis, Nikolaos, Spyros Missiakoulis, Ioannis Dokas, Marios Tzavaras, and Dimitrios Vasiliou. "Tax Avoidance and Transfer Pricing." International Journal of Corporate Finance and Accounting 8, no. 2 (July 2021): 28–39. http://dx.doi.org/10.4018/ijcfa.2021070103.

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Globalization has led multinational companies, beyond intensifying their competitiveness, to seek ways to maximize profits through tax avoidance. The international character enables them to transfer profits to tax havens or seek transactions that will enable them to avoid, postpone, or pay lower taxes. Although the previous allegations have been hypothesized by researchers, tax audits, and governments, it is difficult to prove due to the chaotic data and the causal relationship between variables. The present study compared the tax burden of 971 multinationals and 1,160 independent companies for the years 2010-2017 in Greece, using data from the Amadeus Tp-Catalyst database and confirmed previous research on significant differences in terms of profits and tax burdens. To the authors' knowledge, there has not been attempted such an extensive analysis for Greece in the past.

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Wrede, Matthias. "Multinational financial structure and tax competition." Swiss Journal of Economics and Statistics 149, no. 3 (July 2013): 381–404. http://dx.doi.org/10.1007/bf03399396.

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Bogenschneider, Bret N. "The European Commissions Idea of Small Business Tax Neutrality." EC Tax Review 25, Issue 4 (August 1, 2016): 221–28. http://dx.doi.org/10.54648/ecta2016023.

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The European Commission recently announced a competition policy of what might be called ‘small business tax neutrality’ in several of its state aid rulings. Simply put, states may not grant tax benefits that create a tax advantage to multinational firms in comparison to small and medium enterprises (SMEs). As explained in detail here, the United States (US) is engaged in tax competition yielding a structural advantage in favour of US multinationals against European SME’s including by facilitating the avoidance of European tax, which also notably reduces the foreign tax credit offset upon repatriation of earnings to the US. Also, US tax laws grant US multinationals tax incentives on US earnings including special incentives for R&D and domestic manufacturing which are incremental to the lax enforcement of US tax laws on corporate audits especially with respect to transfer pricing. The anticompetitive effect is that US multinationals enjoy a significant trade advantage against their competitors of all stripes and are able to seize market share from European SME’s (just as also occurred in US domestic markets where SME’s were significantly reduced as competition in the US domestic markets over the past decade). Several policy options are provided herein to reduce the competitive advantage of US multinationals in the respective European markets and particularly with respect to European SMEs.

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Novita, Wellia, and Rahmi Fahmy. "Tax Planning on The Multinational Companies in Indonesia." Asean International Journal of Business 1, no. 1 (January 20, 2022): 1–9. http://dx.doi.org/10.54099/aijb.v1i1.65.

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The discussion of this review is motivated by the problems of multinational companies, especially in Australia, America and Indonesia, which prefer tax planning efforts with Tax avoidance. The purpose of this paper is knowledge of tax planning in multinational companies that occur as a result of business transactions. The results of the discussion prove that each country carries out tax avoidance using 2 (two) measurements, namely the Effective Tax Rate (ETR) and Book Tax Differences (BTD). This writing describes the reasons why business people do tax planning by tax avoidance, which can be explained, namely: 1) Tax laws that cannot be obeyed by companies and provide high costs in fulfilling them. 2) The value of the tax payable becomes large due to the process of calculation errors and deposits as well as tax reporting. 3) The company feels that it is necessary to do tax planning in order to implement tax obligations and fulfill the tax provisions that have been determined, so as not to invite suspicion from tax inspectors, 4) Good public morals in tax reporting. Finally, it is suggested to the readers that the scope of this paper is in accordance with the cases that occurred in several reviewed journals, hopefully it will provide benefits and positive contributions. 4) Good community morale in tax reporting. Finally, it is suggested to the readers that the scope of this paper is in accordance with the cases that occurred in several reviewed journals, hopefully it will provide benefits and positive contributions. 4) Good community morale in tax reporting.

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Lee, Namryoung, and Charles Swenson. "Are Multinational Corporate Tax Rules as Important as Tax Rates?" International Journal of Accounting 47, no. 2 (June 2012): 155–67. http://dx.doi.org/10.1016/j.intacc.2012.03.001.

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Gribnau, Hans J. L. M., and Ave-Geidi Jallai. "Good Tax Governance: A Matter of Moral Responsibility and Transparency." Nordic Tax Journal 2017, no. 1 (July 13, 2017): 70–88. http://dx.doi.org/10.1515/ntaxj-2017-0005.

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Abstract Multinational corporations’ tax practices are hotly debated nowadays. Multinationals are accused of not paying their fair share of taxes. Apparently, acting within the limits set by law is not sufficient to qualify as morally responsible behavior anymore. This article offers ethical reflection on the current debate. The general public typically evaluates (aggressive) tax planning in moral terms rather than legal terms. Therefore, multinationals need to reflect on their tax planning strategy next to economic and legal terms also in ethical terms. This article addresses the relationship between society, morality and taxes. The concepts of tax planning, “aggressive tax planning”, “tax evasion” and “tax avoidance” are elaborated on to exemplify the difference between a purely legal and broader approach. In moral terms, aggressive tax planning may imply loss of integrity and trust which may entail certain costs for businesses, such as reputation damage. It will be argued that in order to improve corporate reputation and (moral) leadership, corporate social responsibility (CSR), endorsed by many corporations around the globe, is a helpful tool. Reflection on tax planning in the context of CSR - good tax governance - should foster a moral mind set and enhance accountability and transparency.

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Lind, Yvette. "Attracting Multinational Tech-Companies Through Environmental Tax Incentives." Intertax 49, Issue 11 (November 1, 2021): 885–96. http://dx.doi.org/10.54648/taxi2021089.

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In this contribution, Sweden´s favourable tax regime which awards a significantly reduced electricity tax rate to data centres is examined. The findings of the paper are applicable to other jurisdictions, such as Denmark and Finland, as they are subject to similar conditions. Data centres are, when subject to the tax regime, subject to less than 2% of the normal electricity tax tariff. Multinational tech-giants benefit heavily from it while many domestic companies (colocation centres) are excluded due to its technical design and attached administrative case law. Initial calculations indicate there is tax savings of more than SEK 500 million (circa Euro 50 million) on an annual basis. Therefore, the tax regime acts as an international tax competition tool through its fiscal state aid function while, at the same time, eroding the tax bases and business life of northern Sweden. It does not initially appear to infringe on EU state aid rules nor the principle of non-discrimination. This Illustrates that there is still some margin of freedom for individual Member States to compete through tax measures. Additionally, tax policy objectives of the tax regime are considered and analysed. In particular, the impact it has had on not only international tax competition but also the economy of local municipalities, local business life, and progressive climate goals. A critical commentary focusing on sustainability is applied throughout the paper. Multinational enterprises, tech-companies, tax incentives, energy taxation, international tax competition.

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Mescall, Devan, and Paul Nielsen. "Corporate Income Shifting in an Era of Tax Multilateralism: The Impact of Exchange-of-Information Agreements." Canadian Tax Journal/Revue fiscale canadienne 69, no. 2 (August 2021): 357–89. http://dx.doi.org/10.32721/ctj.2021.69.2.mescall.

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Using data from the annual reports of over 100,000 subsidiaries of multinational enterprises (MNEs) from 55 countries between 2003 and 2012, the authors of this article investigate the impact of exchange-of-information agreements ("EOI agreements") on tax-motivated income shifting. Transparency created by the signing of EOI agreements is expected to reduce the tax-motivated shifting of income by multinational corporations. Whether such agreements affect the income-shifting behaviour of multinational corporations is an unanswered question. The authors find evidence that, on average, EOI agreements do have an impact on tax-motivated income shifting. Additionally, they find that more advanced, modern EOI agreements are associated with a larger decrease in tax-motivated income shifting compared to the impact of early EOI agreements. This evidence challenges the prevalent assumption in empirical studies that EOI agreements are homogeneous. Supplemental analyses suggest that factors that affect the information asymmetry between MNEs and tax authorities, such as corporations with high levels of intangibles and tax authorities with strong transfer-pricing rules and enforcement, can diminish or enhance the effectiveness of EOI agreements in moderating tax-motivated income shifting. The evidence provided by this study shows that consideration of the tax authorities' information environment and the substance of an EOI agreement is essential when assessing the impact of such an agreement on the tax behaviour of sophisticated taxpayers such as multinational corporations.

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Fulop, Renata. "The influence of fiscal regulations on transfer pricing: a bibliometric review." Virgil Madgearu Review of Economic Studies and Research 15, no. 1 (May 16, 2022): 35–57. http://dx.doi.org/10.24193/rvm.2022.15.84.

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It has been concluded that the concept “transfer price” means the price generated by multinational corporations in the process of commercial activity between the affiliated companies located in different countries and, correspondingly, different tax jurisdictions. The potential use of international transfer pricing as an income shift by multinational enterprises has long been recognized. Many tax-related scandals have been made public in the past few years involving some of the major multinational enterprises at this time. These were accused of practicing tax avoidance on an industrial scale by shifting profits to lower-tax jurisdictions through transfer pricing techniques. Multinational enterprises perform intra-firm transactions with foreign related parties to shift taxable profits by manipulating internal transfer prices. This bibliometric review of the literature we proposed aimed to summarize existing research, recognize patterns, problems, and identify the conceptual content of the field, contributing to the existing theory.

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Conrad, Marcus. "Do multinational corporations pay their "Fair Share"?" Green Finance 4, no. 1 (2022): 88–114. http://dx.doi.org/10.3934/gf.2022005.

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<abstract> <p>Various Multinational Corporations minimize their effective global tax rate, and hence their contribution to public services, through Corporate Tax Avoidance. Taxpaying citizens, however, cannot reap these benefits of country-specific legislation under the international tax system, and frequently carry the majority of the tax burden. Hence, corporations are subject to accusations of not paying a "fair share". Based on equity theory, our paper analyses citizens' perception of fairness in regard to corporate taxation. By executing a mediation analysis, we determine which corporate tax rate is perceived as fair, mediating the relationship between equity theory determinants <italic>(individuals' tax system satisfaction, a social comparison with other entities, and cultural value-based cognition)</italic> and possible system-supportive or detrimental consequences. We confirm that a perception of inequity is prevalent among the 218 participants in our survey, and "fair burden-sharing" is perceived to be non-existent. We contribute to theory by classifying the social comparison determinant as most relevant for the fairness perceptions among individuals towards questionable business practices. Moreover, we emphasize that CTA needs to be considered a possible legitimacy threat for societal and institutional functioning since it may increase citizens' tax avoidant behavior, and jeopardizes social cohesion. However, the cultural values of power distance and masculinity were found to mitigate these generally detrimental consequences of CTA. Our practical and institutional implications put great emphasis on further promoting fairness within the international tax system since the recently suggested global corporate tax rate of 15% is still not considered as fair by our survey participants.</p> </abstract>

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Ali, Sarmad, Adalberto Rangone, and Muhammad Farooq. "Corporate Taxation and Firm-Specific Determinants of Capital Structure: Evidence from the UK and US Multinational Firms." Journal of Risk and Financial Management 15, no. 2 (January 25, 2022): 55. http://dx.doi.org/10.3390/jrfm15020055.

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This paper aims to examine whether effective tax rate and firm-specific factors (such as firm size, growth opportunities, tangibility, risk, profitability, non-debt tax shields and liquidity) impact the capital structure of multinational firms in the energy sector. We employ regression models consisting of OLS, fixed effect and random effect to test balanced panel dataset of multinational firms based in the UK and USA over the period 2011–2019. We show a positive and significant effect of tangibility, risk, profitability and non-debt tax shields on long-term and total debt measures of capital structure. In the case of short-term debt, however, we reveal that it is significantly negatively related to tangibility, non-debt tax shields and liquidity, and positively associated with firm risk. Moreover, we report that the effective tax rate and firm size are insignificantly negatively related to the leverage choices of multinational firms, and liquidity has a significant inverse relationship with long-term debt and total debt. This study reveals mixed support for the prevailing capital structure theories and evidence that multinational firms are unequivocally responsive to the capital structure. The results significantly contribute to evaluating multinational firms in the energy sector and show how managers can achieve an optimal level of capital structure.

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Williams, Braden M. "Multinational Tax Incentives and Offshored U.S. Jobs." Accounting Review 93, no. 5 (January 1, 2018): 293–324. http://dx.doi.org/10.2308/accr-52008.

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ABSTRACT This paper examines if, when, and to what extent multinational tax incentives incrementally explain where firms move offshored U.S. jobs. Using jobs data from a Department of Labor program called Trade Adjustment Assistance, I find a significant association between tax incentives and both the likelihood that a foreign country hosts offshored U.S. jobs and the number of U.S. jobs it hosts. This association is stronger when managers have discretion to coordinate cross-border transactions internally and when they do not face political costs imposed by labor unions. Following instances of offshoring, I find some evidence that offshoring firms have lower effective tax rates, but these reductions are concentrated within larger layoffs in which jobs are sent to low-tax countries. These findings are relevant to understanding the real effects and welfare consequences of incentives created by current U.S. tax policy. JEL Classifications: F23; H26; J63; L14.

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Wu, Hsiu-li, and Shang-Yung Yen. "Base Erosion and Profit Shifting Exploration of Tax Differences and Tax Economics." Journal of Business Theory and Practice 7, no. 4 (October 17, 2019): p155. http://dx.doi.org/10.22158/jbtp.v7n4p155.

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Multinational companies transfer profits to countries with low tax rates via tax planning. In response to the request from G20 nations, the OECD launched a total of 15 BEPS (Base Erosion and Profit Shifting) actions, hoping to prompt the reform in tax systems in different countries. This paper conducts a case study in the examination of taxation differences created by multinational companies by leveraging various tax rates in different countries. Expert interviews are conducted to examine the adjustments and responses of tax planning and investment structures in the corporate world in the wake of the amendments to CFC and PEM tax codes, as well as the correlation between tax revenues and economies. Finally, this paper presents suggestions so that taxes and profits are operated in a fair and efficient environment. This will benefit economic developments and promote effective resources utilization.

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Hanlon, Michelle, and Edward L. Maydew. "Book-Tax Conformity: Implications for Multinational Firms." National Tax Journal 62, no. 1 (March 2009): 127–53. http://dx.doi.org/10.17310/ntj.2009.1.06.

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Clausing, Kimberly A. "Should Tax Policy Target Multinational Firm Headquarters?" National Tax Journal 63, no. 4, Part 1 (December 2010): 741–63. http://dx.doi.org/10.17310/ntj.2010.4.08.

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Al Kwifi, Osama, Shaif Jarallah, and Mouldi Ben Ammar. "Japanese multinational corporations and corporate tax change." J. for Global Business Advancement 14, no. 6 (2021): 732. http://dx.doi.org/10.1504/jgba.2021.10049882.

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Jarallah, Shaif, Mouldi Ben Ammar, and Osama Al Kwifi. "Japanese multinational corporations and corporate tax change." J. for Global Business Advancement 14, no. 6 (2021): 732. http://dx.doi.org/10.1504/jgba.2021.125007.

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Bloch, Francis, and Eric Lefebvre. "Corporate tax competition, tariffs and multinational firms." Economics Letters 65, no. 2 (November 1999): 221–25. http://dx.doi.org/10.1016/s0165-1765(99)00145-7.

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Wunder, Haroldene F. "Tax risk management and the multinational enterprise." Journal of International Accounting, Auditing and Taxation 18, no. 1 (January 2009): 14–28. http://dx.doi.org/10.1016/j.intaccaudtax.2008.12.003.

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Rego, Sonja Olhoft. "Tax-Avoidance Activities of U.S. Multinational Corporations*." Contemporary Accounting Research 20, no. 4 (December 2003): 805–33. http://dx.doi.org/10.1506/vann-b7ub-gmfa-9e6w.

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Duane Hall, R., Ralph J. Gilbert, Partner, Baker, and McKenzie. "Multinational distribution: Channel, tax and legal strategies." International Executive 27, no. 2 (1985): 28. http://dx.doi.org/10.1002/tie.5060270212.

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Stevens, Stan A. "The Duty of Countries and Enterprises to Pay Their Fair Share." Intertax 42, Issue 11 (November 1, 2014): 702–8. http://dx.doi.org/10.54648/taxi2014063.

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In this article the author examines to what extent countries and enterprises have a duty to pay a fair share of taxes. The conclusion of this article is that the current debate pays too little attention to the substance of the fair share obligation. What is a fair distribution of tax revenues among countries and what constitutes a fair distribution of the tax liability among multinational companies? Interests of states and companies are intertwined and sometimes collide. States try to attract investments by introducing tax incentives, but at the same time they want to combat aggressive tax planning by multinational companies to protect their own tax base. The current policy debate requires that the States redefine the allocation mechanisms for (international) taxation. The principle of origin might be a promising concept in that respect. At the same time multinational companies must be accountable for their tax policy, but that is difficult due to the absence of a clear set of standards.

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Kyj, Larissa S., and George C. Romeo. "Microsoft's Foreign Earnings: Tax Strategy." Issues in Accounting Education 30, no. 4 (June 1, 2015): 297–310. http://dx.doi.org/10.2308/iace-51177.

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ABSTRACT The high corporate tax rate and the complexity of the U.S. tax code provide U.S. multinationals with the incentives and opportunities to shift income to foreign low-tax jurisdictions. In theory, U.S. corporations are taxed at the statutory rate of 35 percent on their worldwide income, but income earned by an active Controlled Foreign Corporation (CFC) is usually not taxed until it is repatriated to the parent company in the U.S. As a result, trillions of dollars in cash and investments sit in offshore companies, awaiting a repatriation tax holiday. Much of these earnings are held by technology companies. The case looks at Microsoft Corporation, a company with $60.8 billion in unrepatriated earnings as of 2012. The case considers tax havens, nonrepatriation of earnings, cost-sharing arrangements, and transfer pricing and is intended to expose students to the subtleties and complexities of corporate tax strategies. Although the case is set in 2012, the goal of the case is to demonstrate to the students the complex environment in which multinational corporations operate and is independent of any particular tax regime.

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Oler, Mitchell, Terry Shevlin, and Ryan Wilson. "Examining Investor Expectations Concerning Tax Savings on the Repatriations of Foreign Earnings under the American Jobs Creation Act of 2004." Journal of the American Taxation Association 29, no. 2 (September 1, 2007): 25–55. http://dx.doi.org/10.2308/jata.2007.29.2.25.

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The American Jobs Creation Act of 2004 was signed into law on October 22, 2004. One of the most significant aspects of this legislation is a temporary tax holiday for dividend repatriations from foreign subsidiaries. U.S. multinational corporations may elect during a one-year window to deduct 85 percent of extraordinary cash dividends received from foreign subsidiaries. In this study, we model the impact that this legislation has on a firm's decision to either repatriate or reinvest foreign earnings from abroad. We then examine investors' assessment of how U.S. multinational corporations will respond to the temporary tax holiday. Our results indicate that investors repriced the tax liability consistent with investors anticipating that U.S. multinational corporations will repatriate a significant portion of their permanently reinvested foreign earnings during the tax holiday.

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Brown, Nicholas, Shaun Parsons, and Riley Carpenter. "Multinational tax avoidance: An application of controlled foreign companies and royalty payments in South African legislation." Business and Management Review 11, no. 02 (December 15, 2020): 109–17. http://dx.doi.org/10.24052/bmr/v11nu02/art-13.

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This paper seeks to determine whether South African tax legislation would limit the effectiveness of tax avoidance schemes used by multinational enterprises to avoid their tax liabilities. The paper reviews two commonly used multinational tax avoidance schemes, namely, disregarding controlled foreign companies (‘check box’ regulations) and royalty payments. Using a doctrinal research methodology, the paper considers the application of these schemes within the context of South African legislation. The findings indicate that the effectiveness of the schemes is somewhat curtailed. However, the South African tax base remains at risk, and efforts to combat base erosion are still necessary.

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Nugroho, Adi, and Trisni Suryarini. "Determinant of Thin Capitalization in Multinational Companies in Indonesia." Journal of Accounting and Strategic Finance 1, no. 02 (November 15, 2018): 69–78. http://dx.doi.org/10.33005/jasf.v1i02.27.

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Thin capitalization is an action of tax avoidance by having total debt more than total capital and that debt obtained from the same group of companies. This research aims to obtain the empirical evidence regarding the influence of multinationalism, tax haven utilization, tax uncertainty, firm size, and audit committee size against thin capitalization. The population in this research is multinational companies listed on the Indonesian Stock Exchange in the year of 2014-2016. The sampling technique was purposive sampling and got an analysis unit of 40 companies. Ordinal Least Square (OLS) with SPSS is used as the analytical technique. The results show that multinationalism, tax haven utilization, tax uncertainty, and firm size have a significant positive effect on thin capitalization. The results also prove that the size of audit committees has a significantly negative effect on thin capitalization. This research concludes that thin capitalization is influenced by multinationalism, tax haven utilization, tax uncertainty, firm size, and audit committee size. Suggestions related to this research are for further research to ensure the measurement of tax uncertainty more objectively and to extend sampling time. Keywords: thin capitalization, multinationalism, tax haven, tax uncertainty

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Smith, Michael. "Tax and Incentive Trade-Offs in Multinational Transfer Pricing." Journal of Accounting, Auditing & Finance 17, no. 3 (July 2002): 209–36. http://dx.doi.org/10.1177/0148558x0201700302.

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Multinationals use transfer prices both for tax minimization and for managerial incentives. This paper analyzes two methods of disentangling the tax and incentive roles: setting multiple prices and using performance measures independent of transfer prices. Even with imperfect enforcement of transfer-pricing rules, regulator scrutiny limits the firm's flexibility. Transfer prices affect after-tax income both by influencing the manager's production decisions ex ante and by allocating income ex post across tax jurisdictions. If the ex ante incentive role dominates the ex post tax role, the firm increases the transfer price received by the subsidiary even if the subsidiary tax rate increases.

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Butarbutar, Russel. "Legal Formulation to Overcome Base-Erosion and Profit-Shifting Practices of Digital-Economy Multinational Enterprise in Indonesia." PADJADJARAN Jurnal Ilmu Hukum (Journal of Law) 9, no. 3 (2022): 323–42. http://dx.doi.org/10.22304/pjih.v9n3.a2.

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This study discusses Indonesian legal strategies and formulations to handle tax avoidance originating from Base Erosion Profit Shifting (BEPS) carried out by the digital-economy multinational enterprise. It is a normative (doctrinal) study supported by non-doctrinal methods to reveal the truth based on the logic of legal scholarship. It also compared the practices to the tax provisions, legislation, and cases in India, the United Kingdom, Australia, and Malaysia. At least two theories underlie the study. The first is the legal theory of justice, certainty, and expediency from Gustav Radbruch. The second is the theory of international cooperation. The study found several points. First, multinational enterprise strategies avoid tax by means of Permanent Establishment techniques in low-tax jurisdictions, transfer pricing, and tax treaty shopping. Second, to tackle the multinational enterprise that conducts BEPS in the field of the digital economy, (1) all countries have developed and amended laws and regulations related to e-commerce taxation and the digital economy; and (2) all countries carry out international cooperation, both bilaterally and multilaterally through tax treaties, MLI, and CbC reporting.

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Markle, Kevin S., Lillian F. Mills, and Braden Williams. "Implicit Corporate Taxes and Income Shifting." Accounting Review 95, no. 3 (August 1, 2019): 315–42. http://dx.doi.org/10.2308/accr-52526.

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ABSTRACT The effects of tax rate changes on corporate profitability are not fully understood. Implicit tax theory predicts a positive relation between country-level tax rates and firm-level pretax returns. Conversely, income shifting should make reported pretax returns inversely related to tax rates. Among single-country European firms, we find robust evidence of corporate implicit taxes following tax rate changes, concentrated in firms that rely less on intangible assets and firms in closed economies (non-EU countries). Among multinational firm affiliates, we find the effects of income shifting outweigh the effects of implicit taxes for firms with high intangibles and in countries with open borders. Our results imply income shifting estimated using only reported profits is less biased by implicit taxes in settings with open economies and firms with unique inputs or products. Our evidence also helps explain prior evidence of decreasing corporate implicit tax effects over time, particularly for multinationals.

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Ayuningtyas, Fitria, and Adhitya Putri Pratiwi. "PENGAMBILAN KEPUTUSAN PENGHINDARAN PAJAK PADA PERUSAHAAN MULTINASIONAL BERDASARKAN MULTINASIONALISM, PEMANFAATAN TAX HAVEN DAN THIN CAPITALIZATION." Jurnal Ilmiah Mahasiswa Ekonomi Akuntansi 7, no. 2 (September 22, 2022): 201–12. http://dx.doi.org/10.24815/jimeka.v7i2.20954.

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This study aims to analyze tax avoidance decision making in multinational companies based on multinationalism, the use of Tax Havens and Thin Capitalization. This study uses quantitative methods and uses secondary data from multinational companies listed on the Indonesia Stock Exchange (IDX) in 2016-2020. The sample used in this study used purposive sampling technique and obtained a sample of 32 companies. The data analysis method in this study uses multiple linear regression analysis with the statistical program Eviews 10. The results of this study prove that: Multinationality has a significant effect on tax avoidance, Tax Haven has a significant effect on tax avoidance, and Thin Capitalization doesn’t have significant effect on tax avoidance.

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Journal articles on the topic 'Multinational Tax'

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