Question

Using real examples identify the ways in which Multi-National Companies are making use of tax avoidance schemes to reduce their tax bills in major markets. How are national governments dealing with this problem and what steps can be taken to ensure such behaviour stops? Do you think it is ethical for MNC’s to make use of tax avoidance schemes?

Answer 1

The giving of stock options to employees, as a part of their compensation, is another avenue that has helped companies reduce their total tax bill. When the options are exercised, the difference between what employees pay for the stock and its market value can be claimed for a tax deduction.

Also providing Food Passes, showing them in Salay slips, shift allowances, Petrol allowances.

To Stop

Instead, we should switch to what’s called a unitary model of taxation. The idea is to tax the profit where the economic activity which generates it actually takes place – not where profits are reported. The multinational would report on its overall global profit and also on its activity in each country in which it operates. The governments of these countries would then be allowed to tax the multinational according to the activity in their country.