Tax Avoidance by Multinational Companies: An Analysis of Various Techniques Adopted

Global trade has flourished since industrialization, and as a result, multinational companies have begun operating in several nations with country-specific taxes laws and rates. Transactions between such related or affiliated companies have also expanded under conditions that differ from those encountered by independent enterprises. Due to the transaction by the companies existing in different countries, the tax obligation imposed upon them will be substantially higher. Tax avoidance has always been a threat to an efficient functioning economy, and many companies, mainly Multinational Companies use various techniques to avoid tax obligations imposed by their resident country. Multinational companies can use several techniques to artificially transfer profits from high-tax to low-tax nations, such as altering the prices of related firm transactions and relocating debt to high-tax countries. Tax avoidance affects global operations, the supply chain, and the economic balance of the country as this phenomenon results in companies avoiding hundreds of billions. This article outlines several tax avoidance techniques adopted by Multinational companies for tax evasion.