Tax Avoidance Methods of MNEs and Their Changes

Marczell-Szilágyi, Eszter and Malatyinszki, Szilárd and Kálmán, Botond Géza (2023) Tax Avoidance Methods of MNEs and Their Changes. In: XV. Pécsi Pénzügyi Napok : I. Pénzügy és Számvitel Nemzetközi Tudományos Konferencia = XV. Finance Days in Pécs : I. Finance and Accounting International Scientific Conference. Pécsi Tudományegyetem Közgazdaságtudományi Kar, Pécs, pp. 105-118. ISBN 978-963-626-211-2

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Abstract

Purpose: we examine the corporate tax willingness of multinational companies that operate on several continents and enjoy the benefits of globalization. One of these advantages is the establishment of subsidiaries in countries with favorable tax conditions. Thus, these MNEs deduct a significant part of their profits from tax liability. Only a fraction of the amount saved in this way is, however, used for sustainability purposes, while the states that lose the first tax revenue are forced to spend significant amounts on the same. Methodology: based on a literature review, we present the tax avoidance practices of MNEs based on a few selected examples (e.g. The double Irish with a Dutch sandwich), as well as the fact that these large companies almost create their own legal systems in order to withdraw themselves from state control, and even in possible countries also to decide political issues that will decide his fate. We also present the international cooperation under the leadership of the OECD, whose aim is to change the previous situation, to eliminate the tax procedure practices of MNEs and to involve these organizations in taxation. Results: we report on the changes that indicate the transformation of MNEs' tax strategies towards cooperation. Conclusions: MNEs are among the main winners and beneficiaries of globalization. In recent years and decades, with their economic power, they managed to achieve serious political influence, so that a large part of all their profits are excluded from the obligation to pay taxes. Since the law is always a step behind those who take advantage of legal loopholes, it has only been possible to achieve results through international cooperation in recent years. The willingness of MNEs to pay taxes is changing perceptibly, and the tax revenues from them will play a significant role in dealing with the problem of sustainability.

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