Question

What strategies do multinational enterprises use to reduce or eliminate their US tax liability? Is it fair, moral, and ethical to attempt to pay as little tax as possible? Or should everybody pay their "fair share?"

Answer 1

Following strategies used by multinational enterprises to eliminate their US tax liability :

a. Inversions :- It means shifting of company head quarter from higher tax nation to a lower tax jurisdiction because US does not tax foreign affiliate profits.Tax is only charged on home tax income and no tax is charged on company foreign affiliates.

b. Transfer pricing :- Two countries have generally different tax rate and multinational company takes advantage of this by adjusting the value to higher or lower side for the purpose of payment of tax.

c. Intercorporate loan :- In order to shift or reduce profit they show it as intercorporate loan and thus reduces it's tax liability.

d. Royalty payments :- Most of MNC's earns major income through royalty payment and take advantage of lower tax payment on royalty income.

Yes we can say it is fair,moral and ethical to pay as little tax as possible but it should be done only through legal and ethical ways Everybody should pay fair share after utilising all fair and ethical opportunity to save tax.