Tax Avoidance: Is it legal?: Companies Avoid $200 Billion Tax Bill.
WSJ recently reported on the 2015 World Investment Report (WIR). This is apparently one of the first attempts to quantify tax avoidance. Of particular importance to the global tax community, the Report states MNEs use three main tax avoidance levers: (1) tax rate differentials such as transfer pricing and debt utilization (2) legislative mismatches/gaps such as hybrid mismatches and derivatives (3) double taxation treaties. WIR p.192. These approaches are typically used together in multiple forms. The WIR cites two primary examples: A.) intangibles-based transfer pricing and B.) Financing Schemes. WIR p.194-5.
The British Virgin Islands attracted $72 Billion of foreign investment. In the same period, the U.K. attracted $42 billion. WSJ notes that the U.K. economy is 3,000 times larger that the BVI. Why did this occur? The B.V.I. is a conduit country, which attracts foreign investment. The WIR indicates the reason is to avoid taxes.
The G 20 is expected to release its report later in the year concerning tax avoidance.