How do Multinational Companies (MNCs) benefit from using tax havens? Please illustrate your answer of a...

How do Multinational Companies (MNCs) benefit from using tax havens?

Please illustrate your answer of a MNC benefiting from using a tax haven with an article available in internet and published within the last 24 month in a newspaper or magazine specialized in business or finance (blogs will not be used).

Expert Solution

Tax Haven

A tax haven or offshore financial center is any country or jurisdiction that offers minimal tax liability to foreign individuals and businesses. Tax havens do not require businesses to operate out of their country or the individuals to reside in their country to receive tax benefits.

MNC benefiting from using tax haven

Borderless global trading activities provide opportunities for multinational companies (MNCs) to practice tax avoidance and tax evasion. MNCs with tax haven subsidiaries have higher tendency to shift profits to their subsidiaries. Therefore, this study observes the MNCs and their tax characteristics. Out of 60 MNCs, 56 companies have subsidiaries in tax haven. Analysis shows that MNCs with subsidiaries in tax haven territories, reported lesser profits and paid lesser taxes. The findings confirm that MNCs with tax haven advantage, engage in profit shifting more extensively than MNCs without tax haven links. Therefore, this study highlights on the need to further investigate on this issue to mitigate profit shifting.

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