Wednesday, November 28, 2012

Tax Avoidance Is A Global Problem

Many multinational corporations in Britain paid no corporate taxes to Britain last year.  The same thing occurs in the US and other countries.  Multinational corporations have found ways to place their profits in tax havens.  Some countries, like Ireland, actually produce things.  Many companies produce products in Ireland which has a 12.5% tax rate and they can sell them to subsidiaries in Europe and high prices for resale.  The profits are taken in Ireland.  That practice inflated Ireland's economy, and contributed to its real estate boom and bust.  Other countries produce nothing, but somehow multinational corporates find legal means to take their profits in designated tax havens.

This is not an easy problem to solve as long countries compete with each other by using lower tax rates as an incentive.  It creates a real burden on ordinary people, however, who do not have the option of taking their income in tax havens.  It shifts the tax burden to them, and it creates a strong odor of unfairness. 

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