Incentive

Ecology

Biology

International business

Economic system

Digital economy

Economics

Market economy

Tax competition

Tax reform

Business

Corporate governance

Competition (biology)

Management

Political science

Corporate tax

Industrial organization

Economy

Multinational corporation

International taxation

International economics

Tax avoidance

Finance

Shareholder

Journal of International Business Studies

The international tax regime in relation to multinational enterprises (MNEs) is ineffective and a rethink is required. We illustrate that the tax avoidance motive of MNEs can incentivize managers to locate profits in low-tax jurisdictions without affecting the locations of their real operations. We also argue that proposals to tax shareholders and consumers rather than corporate profits face significant theoretical and practical obstacles. Finally, we extend a recently proposed model to tax MNEs using a sales-based allocation of consolidated worldwide profits. This aims to prevent MNEs shifting profits to low-tax jurisdictions and reduces incentives for tax competition between countries.

The rise of the digital economy: Rethinking the taxation of multinational enterprises