Profit shifting is a strategy used by multinational corporations to reduce their tax liabilities by moving profits from high-tax jurisdictions to low-tax jurisdictions. This practice exploits differences in tax rates and regulations across countries, often leading to significant tax base erosion in higher-tax countries.

Profit Shifting

Profit shifting

Multinational Corporations (MNCs) are large enterprises that manage production or deliver services in multiple countries, leveraging global efficiencies in production and distribution. They play a significant role in globalization, influencing economic, political, and cultural dynamics worldwide.

multinational corporations

Tax liabilities represent the total amount of taxes that an individual or entity is legally obligated to pay to the government within a given period. Understanding and managing these liabilities is crucial for financial planning and compliance with tax laws to avoid penalties.

tax liabilities

high-tax jurisdictions

low-tax jurisdictions

Tax rates determine the percentage at which an individual or corporation is taxed on their income, profits, or other taxable entities. They are crucial for government revenue generation and can influence economic behavior, investment decisions, and income distribution within an economy.

tax rates

Tax regulations are the legal framework governing how taxes are calculated, collected, and enforced by government authorities. They ensure compliance, fairness, and transparency in the taxation process, impacting individuals, businesses, and the economy as a whole.

Tax Regulations

Tax base erosion refers to the reduction of the taxable base due to practices that shift profits to low or no-tax jurisdictions, thereby undermining a country's tax revenue. It is a significant concern for governments as it impacts their ability to fund public services and maintain fiscal stability.

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