There has been a lot in the news recently of large multinational firms like Google, Amazon and Apple dodging taxes or not paying their fair share. What are the techniques they adopt to successfully do this whilst remaining within the confines of the laws of the countries they operate in?
Transfer pricing is the main tool used by MNCs (Multi-National-Corporations) to reduce their tax liabilities. An MNC is usually made up of different subsidiaries (basically businesses or departments within the business, wholly owned by the ‘parent’ company – the MNC) and so profits can be shifted about to different subsidiaries. Subsidiaries can be different departments or firms, or it could be the different operations around the world. [...]