factors that influence how individuals and MNC positioned themselves to the tax law
As described in the theoretical and conceptual frameworks, the stud identified three factors that influence how individuals and MNC positioned themselves to the tax law. Consequently, the study measured tax compliance and non-compliance as well as analyzing the relationship between tax avoidance, planning, and evasion. In view, it was evident that the tax planning has zero correlation with the tax compliance that is; r(330)=0.064, p=0.243.
On the other hand, tax avoidance shown a negative correlation in relation with self-reported and MNC compliance r(330)=-0.298, with a probability of less than 0.001. Tax evasion and avoidance indicated a negative association with tax compliance; hence, they signify that they are forms of non-compliance. Importantly, tax evasion portrayed a stronger negative correlation with compliance as compared to tax avoidance where z=6.695, the probability is less than 0.001. These results suggest that tax avoidance and tax evasion are perceived as non-compliance practices.
According to the findings, profits shifting induces a negative association between stated profit and tax differentials. Nonetheless, sources of data had insufficient information, and the local statutory tax rates take time to change. On the other hand, MNC’sMNC’s likelihood to be involved in tax avoidance was predicted by low corporate norms of good public contribution in which there is a sense that the tax system lacks fairness and the belief that the tax regime is flexible and can be manipulated for profit.
The plan to reduce the tax bill of the technology company emphasizes on its overseas operations. However, there are companies that include Apple that employs different techniques that minimize internal taxes and international taxes. Apple uses a subsidiary that is incorporated in Ireland to avoid paying taxes. Even though Apple’sApple’s subsidiary was founded in Ireland, it is managed in the US. Out of $29.9 billion generated between 2009 and 2013, Apple has not paid any taxes because its complications are arising from where the firm was incorporated and where it is managed.
Conclusion
According to Desai et al. (2004), when companies use tax haven to avoid paying taxes, the economic activities of non-haven jurisdictions are strengthened. The tax haven heightened the process of tax competition between countries may cause inefficiencies in the provision of public goods. On the other hand, the study has reviewed various literature on tax avoidance of MNC in areas that include transfer mispricing and strategic location of the intellectual property. However, the study found less evidence about other channels of profit shifting. For instance, Apple can structure its businesses to artificially avoid the establishment of permanent residence hence able to avoid source country taxation at the beginning.
It can be noted that the lack of systematic analysis on the alternative channels of profit shifting is associated with their highly technical and complex aspects, as well as the availability of inadequate data. Thus, greater analysis in this area is required to improve knowledge on the structure of international taxation.
In view of the literature review, the study noted that there is limited information about the systematic variation in tax avoidance in many countries, firms, and sectors. MNC such as Apple use aggressive tax planning, among other strategies to avoid tax bills. However, Apple has agreed to pay the UK an approximate of £136 billion avoided tax in a bid to rebuild its trust and reputation.