Question

1. The U.S. Export-Import Bank (ExImbank), which promotes U.S. exports through loan guarantees and insurance programs, has been criticized for favoring corporate interests ahead of the interests of U.S. taxpayers. Should taxpayers be supporting the exports of large U.S. MNEs?

2. Is it appropriate for MNEs to establish operations abroad solely for the purpose of avoiding taxation?

Please discuss your thoughts and comments.

Answer 1

1) Industries and companies which can are export centric ultimately generates a large amount of employment and also adds to the economic growth of the country. They also help in earning precious foreign exchange. This helps in macro economic stability for the country leading to growth of the economy and development of the community. So supporting the US MNEs through tax payer's money ultimately help the US economy as it generates growth, makes US industry competitive in the global market and provides large scale jobs to the population. So keeping these in mind, it is imperative that tax payers money could be spent on supporting these enterprises.

2) It is not appropriate for MNEs to solely base their decision of locating the site of business on tax related issues. Since tax laws can change and the arbitrage could be lost for the company, it is not wise to follow this route. Instead setting up operations should be based on factors such as availability of resources, labor and any source of competitive advantage that the location provides which cannot be easily imitated or can be destroyed.