Tax Avoidance by MNCs: Blame Firms or Tax Systems?

Tax Avoidance by multinational corporations has become a hot topic across the globe. Many of the biggest corporations in the world have been in the news for not paying their fair share of income to the respective countries. While they have been criticised for dodging tax, the legal loopholes used by them provide shelter for doing so. Many governments and tax authorities are concerned about this subject, as it is causing huge revenue losses to the countries. This research paper evaluates the loopholes in the international tax system. In order to do so, cases of tax avoidance are analysed to find out the tax planning strategies of the corporations. The cases analysed here shows the evidence of profit shifting by the companies. It also depicts the methods they adopted to avoid different taxes. The analysis of six tax avoidance cases shows that there are many common loopholes, which were exploited by these companies. These include the opportunities to create any number of intermediate holding companies and subsidiaries, differences in determining tax residency by different countries, chances to use tax havens, transfer pricing & the difficulty in valuing intangible assets, and intra-group financing arrangements