Globalization Impact On Corporate Taxation

Globalization has allowed many corporations to take advantages of shareholder wealth and higher profits through operating in several regions at the same time. They comes with more corporate taxation as you would expect, the thing that we all look down on but it is necessary for the governments to work. Naturally, corporations have their own means to lower, avoid or hide paying taxes. This is commonly done through tax avoidance, an official approach to gain the huge profits and pay the minimum amount of taxes.

Corporate TaxationA tax haven is merely a region where certain taxes are nonexistent or at lower rates than other countries. The taxes themselves in addition to their secretive nature are what appeals corporations to function in those countries. Taxation havens are part of off-shoring where corporations move part of their functions to tax havens while persisting to profit in the home country. This practice alone costs governments $255 billion as a minimum each year in lost taxes in accordance with Taxation Justice Network.

Transfer pricing is the practice of creating accounts where the transaction of the multinational corporation is charged. These accounts themselves are offshore that manage the pricing of the transactions among the main company and its subsidiary for instance. These accounts are created in the tax havens mentioned previously, allowing for even lower rates of tax. The price policy that the corporation uses directly influences the amount of taxes the corporation will pay to the regions they operate in. This permits intra-company trade to enhance dramatically rather than trading with outside countries or companies. This practice causes countries to diminish essential tax revenue, irrespective of wealth status. To summarize, Globalization did allow companies to boost profits, but at the same time use newest approaches of tax avoidance. A universal corporate taxation system should subsist with globalization to impede tax avoidance and bring in tax revenue.

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