IndexTax Avoidance OverviewGovernment and LegislationGlobal Trade and CompetitionMultinational CorporationsConclusionIn 1789, Benjamin Franklin wrote a letter stating: “Nothing in this world can be said to be certain, except death and taxes ”. Taxes have long been seen as an unavoidable cost for businesses. Nowadays, with the benefits of globalization, however, multinational corporations (MNCs) have developed complex tax strategies to minimize this liability. Gunter & van der Hoeven briefly discussed one aspect of tax avoidance, but ignored its impact on the global economy. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay This research will analyze the effects of globalization on tax avoidance in developed countries and identify how multinationals participate in this event. The outcome of this study will contribute to a better understanding of how multinationals avoid paying taxes in their respective countries of consumption. Furthermore, it could also serve as a basis for further research on how countries can adapt their tax revenue strategies and prevent this revenue shortfall. This article begins by defining tax avoidance and how this phenomenon came to be. Furthermore, it continues to analyze the impact from three different perspectives in the business world: government and legislation, global trade and competition, and the multinationals themselves. Finally, the paper draws a conclusion on the issues related to this topic. Tax Avoidance Overview When talking about taxes in the context of globalization, the definitions of tax avoidance and tax evasion are often confused. Therefore, in this document we will use the definitions provided by the Organization for Economic Co-operation and Development (OECD), according to which tax avoidance is "the disposition of a taxpayer's affairs intended to reduce his liability and which, although a provision may be strictly legal, it is usually contradictory to the intent of the law it purports to follow.” In contrast, tax evasion is defined by “illegal arrangements in which tax liability is hidden or ignored.” definition of tax avoidance, it quickly becomes apparent that there is no clear black-and-white area that distinguishes right from wrong. This “gray” area often allows you to develop creative ways to minimize a company's tax burden. While there are many different approaches, tax avoidance is primarily classified into three groups: postponing tax payments; accounting for goods, services, income, or expenses at a rate that reduces or alleviates tax liability; or shifting revenue flows from high-tax countries to low-tax countries through various methods. Government and Legislation Government can best be divided into two groups, each with a different interest in the country. On the one hand, policymakers emphasize the need to minimize tax avoidance gaps (more commonly referred to as anti-avoidance rules or AARs) and thus stimulate a country with equal trading opportunities. On the other hand, the group mainly consists of politicians and political scientists who compete in the international money market. The latter is therefore mainly interested in foreign direct investments (FDI), since these, in addition to tax revenue, also bring secondary benefits such as employment. Furthermore, it is empirically demonstrated by several studies that an increase in taxes shows a significant negative correlation with foreign direct investment. Taking the point of view of politicians, it is clear that organizations such as the OECD and the UnionThe European Union (EU) are currently gaining momentum in mitigating aggressive forms of tax avoidance. In the case of EU member states, the potential lost tax revenue due to tax avoidance amounted to around €1.33 trillion in 2014, according to Raczkowski. Although some people question Raczkowski's methodology, most researchers agree that there is a significant gap in tax revenue. Knowing this potential gap in tax revenues, the OECD and groups such as the Tax Justice Network argue for a better global governance platform that allows countries to exchange information. While this is becoming available upon a country's request, the bigger problem, according to Rixen, lies in the fact that tax legislatures are mostly written within a country's national framework, often ignoring competing interests with other countries . In contrast, policy researchers argue that creating strong global governance is too radical and, for some reasons, even undesirable. They indicate that corporate income tax rates from 1981 to 2008 clearly show a sharp decrease for most developed countries. Over the same period, however, a country's gross tax revenue relative to GDP has remained stable. This has led many political scientists to argue that corporate tax cuts do not have a significant impact on total tax revenue. This statement, however, leaves valuable evidence out of the equation. While corporate tax rates in developed countries have generally declined over time, the distribution of taxation has widened towards a broader tax base (more new forms of taxation other than corporate tax) resulting in a tax shift from multinationals to tax burdens aimed at small and medium-sized businesses. businesses. An example of this is the increase in forms of taxation on labor while lowering capital gains tax in some EU member states. In conclusion, it appears that both politicians and economists each measure a country's performance in their own way, making it difficult to compare the (dis)advantages of each. However, one thing is certain, countries actively compete to attract the greatest number of companies to their country, often overlooking that this is to the detriment of local SMEs. Global Trade and Competition Although governments are left with undecided conclusions about what the best tax strategy is for countries, this part of the study focuses on how taxes affect trade and equality in competition for profit-oriented organizations . Looking at the growth of the global economy, it is evident that globalization has increased the number of multinational corporations. While around 6,000 multinational organizations were registered in 1960, the list grew to almost 80,000 in 2006. This growing increase demonstrates that globalization has, among other factors, a positive impact on merger and acquisition (M&A) activity such as many companies nowadays. divide their production into different processes in different countries. While research on the competitive advantages between multinationals and small and medium-sized enterprises (SMEs) is extensive, many case studies have explored how multinationals such as Starbucks, Amazon, Google, and Fiat structure their legal entities and pursue aggressive tax avoidance strategies . In one particular case with Starbucks, Reuters investigated their earnings in the UK. Although the company has been active on the British market since 1998 and has had a gross turnover of around £3 billion in those years, it has only paid £8.6 million in corporation tax. This in other words means that the company has.