A Better Way to Fight Corporate Tax Avoidance
By José Antonio Ocampo – March 8, 2018
Over the past few years, leaks of documents such as the “Panama Papers” and the “Paradise Papers” have exposed the dark underbelly of globalization, and provoked indignant denunciations of tax avoidance from people around the world. Ordinary workers have no choice but to pay their taxes. But, apparently, multinational corporations and wealthy individuals can get away with paying hardly anything.
The most shocking feature of today’s corporate-tax-avoidance schemes is that they are legal. When multinationals create subsidiaries, those entities are considered to be legally independent firms. A parent company can then set the prices of transactions between its subsidiaries to register its profits in low-tax countries, rather than where the original economic activity actually occurred.
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