How do governments combat tax avoidance by multinational corporations?

To combat tax avoidance by multinational corporations, governments employ a number of strategies. One way is to enact laws that require companies to pay taxes on income earned in their own countries. Many nations also have international agreements called “Double Taxation Treaties” with other countries. These treaties help to ensure that the same income is not taxed more than once in different countries. Another accepted practice, which is used in New Mexico, is transfer pricing. This process involves multinational companies setting prices for goods and services traded between subsidiaries within the same company to ensure they are charged the same tax rate as if they were dealing with an unrelated third party. The U.S. government has also recently enacted the Foreign Account Tax Compliance Act (FATCA). This act requires foreign financial institutions to send information about accounts held by U.S. taxpayers to the Internal Revenue Service (IRS). This reduces the ability of multinational corporations to move their profits into tax havens or to keep profits hidden from the IRS. Overall, governments have taken a number of steps to combat tax avoidance by multinational corporations. These steps help to ensure that companies are paying their fair share of taxes.

Related FAQs

What are the implications of the European Union's Common Consolidated Corporate Tax Base (CCCTB)?
What is the base erosion and profit shifting (BEPS) initiative?
How do digital services taxes work?
How do governments apply transfer pricing rules?
What is International Tax Law?
How do governments tax the income of non-residents?
What are the different forms of tax avoidance?
What are the specific implications of the USA's Foreign Account Tax Compliance Act (FATCA)?
How do countries use tax information exchange agreements?
How do governments tax corporate income?

How do governments combat tax avoidance by multinational corporations?

Related FAQs

Related Blog Posts