Large multinational corporations have been taking advantage of disparities in tax

regulations among different nations to avoid paying their fair share of taxes. This has

become a major concern for the Australian government, which is taking strict measures

to tackle the issue. Experts and regulatory authorities believe that some of the world's

most profitable multinational firms are engaging in transfer pricing, which involves

transferring earnings from high$-$tax jurisdictions to 'tax havens' to underpay their taxes.

To address this issue, there is a proposal to shift the taxation approach for corporations

from the individual legal entity level to a consolidated group level.

Required

Discuss your assessment of the proposal. Specifically, you are expected to:

$1.$ How do large corporations manage to move their profits across borders and

avoid taxes through transfer pricing?

$2.$ Can you provide a real$-$world example of a multinational corporation

attempting to evade taxes by using foreign subsidiaries?

$3.$ What is the reasoning behind the proposal, and how might it help prevent this

type of tax evasion?

$4.$ What challenges or obstacles may arise during the implementation of this

proposal?

$5.$ What recommendations can be made to tax authorities to prevent profits from

being transferred from high$-$tax countries to tax havens?

Answer rating: 100% (QA)

The Australian Governments Proposal to Address Corporate Tax Avoidance 1 How Large Corporations Use Transfer Pricing to Avoid Taxes Manipulating Prices Companies with subsidiaries in different countri... View the full answer