Business Law (Interbational) - Essay Example

Schafer (31-46) explicitly describes the current rules applicable to the taxation of companies operating internationally. For examples, multinational companies or enterprises, and firms sited in another locality different from the residence of the people in charge of the companies’ administration. The following taxation principles are in operation: Establishment of framework for international taxation: Schafer (31) strongly believes that the first step in determining what kind of taxes to pay to which locality begins by establishing the framework for the taxation.

The importance of the framework is to stipulate: one, whether a jurisdiction is entitled to tax income from an internationally run firm; two, the allocation formula among the entities that could claim the rights to the tax income; and, finally, preventive measures to avoid unduly double taxation. Jurisdiction issue: Schafer (33) defines a jurisdiction as the “company’s residence country where its main activities are concentrated, and the company utilizes the benefits provided by the residence country”.

Some of the benefits the residence country (a tax haven, possibly) provides to the company may include economic resources, security or legal, financial, physical and social infrastructures that could be used at a cheaper cost compared with the expensiveness of such benefits at the company owners’ home countries, as in the case of the three friends from OECD countries (Schafer 33). And tax incomes are traditionally paid to the jurisdiction where is company is situated. Technically, a company’s jurisdiction could be described as the place where the company is registered or incorporated.

In case it is unclear to ascertain the exact jurisdiction of a company based on its legal registration, the company’s place of economic allegiance, that is, where its main management structure and business operation reside could be taken as the