Question

7. Describe the ways in which multinational corporations are able to reduce their global exposure to tax liabilities. Be sure to identify the primary tools used and the potential financial benefits from successful tax management programs.

Answer 1

Answer:

Ways in which multinational corporations are able to reduce their global exposure to tax liabilities are given below

Explanation:

There are a lot of different ways of reducing global exposure to tax liabilities a multinational corporations can opt for. Some of the ways are mentioned below.

1. Transfer pricing is an strategy for setting a transaction price between the organizations under the same ownership or control.

2. Payments for intangibles is a strategy where no taxes are paid due to the keeping of intellectual property rights.

3. Profit shifting strategy is usually used to avoid large tax rates by transferring the profits to tax haven countries or areas where the tax rate is very low.

4. Corporate debt-equity is a strategy usually used for reducing taxable profits in high tax countries.

5. The Conduit technique is used by the organization to channel their money through a country to assist favorable tax rates.

   Benefits

• High transparency and efficiency in all tax-related processes.

• Transaction costs can be minimized.