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    International Tax, Regulatory Arbitrage and the Growth of Transnational Corporations

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    Date
    2018
    Author
    Picciotto, Sol
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    Abstract
    This paper traces the history of international corporate taxation, discusses how transnational corporations (TNCs), through their tax advisers, have helped to shape the system, and suggests that this is important in understanding the development of TNCs. It argues that a key competitive advantage of TNCs is their ability to exploit differences in corporate tax rules, as a form of regulatory arbitrage, which is facilitated by the inadequate coordination of those rules. It focuses on the divergence between the understanding in business, economics and international studies that TNCs are unitary firms and the principle which has increasingly hardened in international tax rules, especially on transfer pricing, that the various affiliates of TNCs in different countries should be treated as if they were independent entities dealing with each other at arm’s length. It argues that this facilitates tax avoidance, which is one of the strategies of the exploitation of regulatory differences, or regulatory arbitrage, which has contributed to the growth and oligopolistic dominance of large TNCs. While claiming that they merely obey the laws of each country where they do business, TNCs have taken advantage of their global reach to mould laws and normative practices, and develop structures taking maximum advantage of the loose coordination of global governance regimes.
    URI
    https://opendocs.ids.ac.uk/opendocs/handle/20.500.12413/14295
    Citation
    Picciotto, S. (2018) ‘International Tax, Regulatory Arbitrage and the Growth of Transnational Corporations’, in Transnational Corporations: Investments and International Taxation, Volume 25, 2018, Number 3 Special Issue on Investment and International Taxation (Part 2), UNCTAD
    Is part of series
    Transnational Corporations;Volume 25, 2018, Number 3, Special Issue
    More details
    https://unctad.org/en/PublicationChapters/diaeia2018d5a3_en.pdf
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    © 2018, United Nations All rights reserved worldwide.
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    https://www.ids.ac.uk/wp-content/uploads/2018/12/IDSOpenDocsExternalDocuments.pdf
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    • International Centre for Tax and Development [394]

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