‍‍‍Multinational+corporations+(MNCs)

Definition
A concept of a multinational corporation is a complex one. Multinational corporation (MNC), transnational corporation (TNC), multinational enterprise (MNE) - several terms are used to describe the same phenomenon ultimately connected to globalisation and large enterprises operating in various locations around the world.

According to Franklin Root's definition MNC is a parent company that 1. Engages in foreign production through its affiliates located in several countries 2. Exercises direct control over the policies of its affiliates 3. Implements business strategies in production, marketing, finance and staffing that trascend national boundaries

 The European Commission's Eurostat glossary uses more simplified language when defining MNCs - MNC is a corporation that produces goods or delivers services in more than one country. Usually a MNC has centralised headquarters from where the global operations are coordinated, and several fully controlled subsidiaries around the world. Nowadays MNCs represent a large part of the global trade.

 Multinational corporations in the context of tax planning
 By definition MNC is a corporation that operates in several locations around the world. The global organisational structure together with the aim to maximise the profits of the shareholders can lead the organisations to look for ways to increase their "tax efficiency". Unlike tax evasion, tax avoidance is legal but many companies still tend to push towards the legal grey areas by using aggressive strategies to increase the efficiency of the tax planning.

 Many countries also encourage investments by offering tax breaks for a certain period of time or using other similar methods in the hopes of attracting a corporation to the country. However, the tax lost especially by the developing countries due to the tax planning instruments used by the MNCs is causing enormous damage to the economies of the poorer nations. The developed nations in the European Union and the United States are also suffering considerable losses of as a result of the tax dodging. MNCs frequently take advantage of the tax havens available around the world.

 Transfer pricing is an integral tool of MNC operations when avoiding taxes. Tax Justice Network describes it as follows: "transfer pricing happens whenever two related companies – that is, a parent company and a subsidiary, or two subsidiaries controlled by a common parent – trade with each other, as when a US-based subidiary of Coca-Cola, for example, buys something from a French-based subsidiary of Coca-Cola. When the parties establish a price for the transaction, they are engaging in transfer pricing". However, transfer pricing in itself is not illegal, but it can become illegal when it turns to transfer mispricing.  Other methods used are for instance profit shifting strategy, corporate debt-equity, payments for intangibles and shell holding companies.

Multinational corporations and tax legislation
 The European Union has recently introduced two non-legislative resolutions which promote the closing of the existing loopholes, combating the aggressive tax planning and coordinating the tax systems in order to better change information over tax matters.

 OECD's report "Addressing Base Erosion and Profit Shifting" (2012) concludes that in addition to a need for increased transparency on effective tax rates of MNCs, key pressure areas include those related to:
 * International mismatches in entity and instrument characterisation including, hybrid mismatch arrangements and arbitrage;
 * Application of treaty concepts to profits derived from the delivery of digital goods and services;
 * The tax treatment of related party debt-financing, captive insurance and other intra-group financial transactions;
 * Transfer pricing, in particular in relation to the shifting of risks and intangibles, the artificial splitting of ownership of assets between legal entities within a group, and transactions between such entities that would rarely take place between independents;
 * The effectiveness of anti-avoidance measures, in particular GAARs, CFC regimes, thin capitalisation rules and rules to prevent tax treaty abuse;
 * The availability of harmful preferential regimes.

Examples of multinational corporations
 The following multinational corporations are often mentioned by the media in the context of tax avoidance, naturally many more exist too:


 * Adobe
 * Amazon
 * Apple
 * Facebook
 * Google
 * Starbucks
 * Vodafone

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