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International Taxation - Essay Example
Author : colelorna
Finance & Accounting
Pages 8 (2008 words)
International Taxation Name: Institution: Introduction The rapid globalization in the recent decades has given rise to a large number of multinational companies (MNCs) that have that have operations in several countries. The growth of international business has brought with it the challenges of harmonization of business strategies in the different geographical locations of operations…
Essentially, this means that a multinational company with hundreds of companies worldwide is not regarded as a single economic entity but rather as an amalgam of independent tax paying companies1. There has been intense debate on whether it would be wise for the international taxation to be changed to allow for the holding company to pay the group’s consolidated tax. The proponents of this argument state that it would be much more convenient and efficient for consolidated tax returns as applicable to multinational companies. Anti-avoidance legislation Tax avoidance can be defined as the lawful measures that a firm may take in order to reduce their liability to payment of tax. It should be noted that tax avoidance is not illegal but its effect on the economy may be dire. The question of avoidance of tax has been of great contention considering the fact that the firms have a responsibility of being diligent in their dealings with the state. In order to mitigate the negative impacts of tax avoidance, governments have been in the forefront of enacting anti avoidance legislation that is aimed at sealing the loopholes that allow for tax avoidance. One of the strategies that governments have used is the adoption of general anti avoidance rule. ...