Offshore Activities and Corporate Tax Avoidance

Taxation of multinational companies (MNCs) has received increasing attention from politicians, the media, regulators, and academics. While the popular press provides considerable anecdotal evidence that large MNCs pay lower taxes than their domestic counterparts, academic research provides mixed evidence on how multinationality affects taxation. Although foreign operations provide additional cross-border tax avoidance opportunities such as income shifting to low-tax rate jurisdictions, the existing empirical studies find that MNCs do not have significantly lower effective tax rates than purely domestic firms have. As more U.S. firms become multinational and engage in offshore activities of serving foreign markets and moving production overseas, … Read more