Multi-nationals Transfer Pricing or 'profit shifting', call it what you wish, is a by-product of globalisation that enables companies to avoid taxes and facilitates the flight of capital from one jurisdiction to another

Whether it is 'Costa Del Crime' or 'Costa Del Tax Avoidance' the effect is basically the same - countries setting themselves up to potentially shelter companies or individuals from the penalties of avoiding the law in other states

This is nothing short of 'cooking the books' by affording corporations the discretion to allocate costs & overheads to favourable geographical locations; thereby minimising taxes and maximising profits

Essentially state sponsored encouragement for corruption and there are a number of countries making a very comfortable return from this approach.

Anyway, perhaps someone could explain how the likes of Ireland manages to get away with this as well as being a member of the EU. Yes it does help them remain solvent but at what cost to other member states with the likes of Apple, Microsoft, Google etc. avoiding tax in other EU countries

Is this a harsh assessment?

Well consider this:

  • These practices affect the state both in setting tax rates and also in allocating tax revenues
  • Capital is exported from the country of origin to favourable locations. This inhibits the flow of money in the country of origin which is an essential component for healthy growing economies
  • This capital flight could seriously impact on citizens in the county of origin. This affects hospitals, pensions, state benefits, country wide infrastructure etc. So anyone in the country of origin is being deprived of the resources (taxes) which would enhance their quality of life
  • Some of this infrastructure is used by the multi-nationals to facilitate their sales and yet they are trying to avoid paying for its upkeep - i.e. roads etc.
  • Don't forget that the major beneficiaries of suggesting these schemes are the accountancy profession

Solution

A good start would be for HMRC to be given powers similar to US section 482 Internal Revenue Code

'.. to allocate income, deductions, credits or other allowances between or among controlled entities if that allocation is considered necessary to prevent evasion of taxes ..'

This should place all these multi-nationals on notice - then take matters forward from there

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