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False Profits
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False Profits

Avoidance by multinationals and competition between governments are forcing a rethink of the international tax system

Michael Keen
IMF, 2017
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Editorial Rating

8

Qualities

  • Controversial
  • Overview
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Recommendation

The tax foundation for companies that operate globally remains fairly similar to what it was a century ago, despite fluid tax borders created by digital technology and the growth of intangible assets such as patents and licenses. This timely report from fiscal expert Michael Keen illustrates the twin problems of “tax avoidance” and “tax competition” in a radically transforming global economy. getAbstract recommends this instructive article to corporate executives, government officials and others interested in the potentially harmful effects of tax shopping by multinationals.

Take-Aways

  • The current global tax system presents two major problems: “tax avoidance” by multinationals (MNCs) and “tax competition” among countries.
  • MNCs and governments bend rules to their advantage in a variety of ways, often to the benefit of the more developed economies.
  • MNCs can get around “arm’s length pricing,” a system designed to apportion taxable profits in a fair and equitable manner.

About the Author

Michael Keen is a deputy director of fiscal affairs at the International Monetary Fund.

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