Corporate tax avoidance

Taxing multi-national corporations (MNCs) poses a challenge to national governments in a globalized economy. MNCs can move economic activities to low-tax jurisdictions or shift profits across countries to reduce their tax payments. The issue of tax avoidance has received substantial media coverage in recent years. At the same time, the pressures on governments to consolidate public finances, a condition called austerity, and expanding needs for public expenditures intensified the need of governments for raising tax revenues. While for several decades efforts at international cooperation to reign in corporate tax avoidance have been low-key, international efforts have been stepped up following the Global Financial Crisis that began in 2007. This entry first gives a brief overview of accounting methods commonly used by MNCs to reduce their tax payments, before presenting initiatives aimed at limiting corporate tax avoidance so far by the Organization for Economic Cooperation and Development (OECD) and by the European Union (EU).