Tricky Tax: Two Tax Avoidance Schemes Explained
June 10th, 2009
A 2009 report by Gideon Benari
This report describes, in plain language, the technical processes and structures of two commonly used tax avoidance schemes – transfer pricing and outward domestication. Both involve multinational corporations shifting profits across borders.
Transfer pricing is the setting of prices for internal transactions between two subsidiaries of the same corporation. These transactions are estimated to constitute 60 per cent of all world trade. Outward domestication is a way of transferring assets across borders to countries with lower tax rates.