A Quest into the Reasons Why Multinational Enterprises Pay Less Tax - Essay Example

Multinational enterprises are very productive, and as result, they are the targets for the taxmen, who are lured for their supposed high profits which are considered to be ripe for tax generation. Nonetheless, taxmen have raised a red alert over the difficulty in taxing them. Egger, Eggert & Winner (2010) empirical research solidified the belief that multinationals pay very little tax considered in the light of their income. The paradox is that some of these companies market themselves to their potential investors as profitable.

Tax Evasion
This debate initially hinged that the multinationals evade taxes through manipulation of their financial ratios and prices. However, this view has been dismissed by tax experts, terming this view as too simple.

Tax regulations
Low tax remittance could be the direct result of tax law regulations than the earlier view. Certainly, this view is intertwined into the fundamental tenet of international taxation, which is the arms-length principle (Dunning & Lundan, 2008). This principle implies that business relations between different subsidiaries of a multinational are considered as if they had occurred between different parties, for tax purposes (Eden, 1998). Read More