08a mn cs and tax

Seminar 8:MNCs and tax

Reducing tax bills

• Multinational corporations (MNCs) use several methods to reduce their tax bills

• Many of these methods are perfectly legal:• a) they take advantage of loopholes in

existing tax laws• b) they take advantage of lower rates of

taxation in some countries

Registration scams

• Corporations often register their legal addresses in low-tax jurisdictions to reduce their tax liabilities

• Such registrations often involve the creation of fictitious entities, with the companies conducting no actual transactions in the place of registration

BMW

Samsung

Gazprom

Coca Cola

Ugland House?

Ugland House

• Ugland House, in the British Cayman Islands, is the registered legal address of more than 18,000 companies

• The Cayman Islands are a notorious tax haven, where multinational companies divert profits to minimise their tax liabilities

1209 North Orange Street,Wilmington, Delaware?

Delaware

• 1209 North Orange Street, in Wilmington, Delaware is the legally registered office of more than 200,000 corporations, including Ford, Coca Cola, General Motors and Kentucky Fried Chicken

• These companies all benefit from Delaware’s business-friendly tax laws, allowing them to reduce their corporate tax bills

Other tax havens

• British Virgin Islands• Belize• Luxembourg• Monaco• Switzerland• Hong Kong• Mauritius• Liechtenstein

Transfer pricing

A simple guide from the Guardian

http://www.guardian.co.uk/flash/page/0,,

2201916,00.html

Fake loans

• MNC subsidiaries in high-tax jurisdictions often take out loans from other subsidiaries

• The interest on these loans can be offset against profits

• The loans can often be suspiciously large, allowing subsidiaries to reduce declared profits and thus minimise their tax liabilities