A continuing debate on the ‘race to the bottom’ and tax-avoidance policies of MNE's

Belgraver, Herman and Akhavan Farshchi, Mahtab (2015) A continuing debate on the ‘race to the bottom’ and tax-avoidance policies of MNE's. In: The Fifth Reading-UNCTAD International Business Conference 2015, At Reading, United Kingdom, 13-14 June 2015, Henley Business School, University of Reading, UK.

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Abstract

The issue of tax avoidance has once again come to prominence in public debate (IMF, 2014). The change in government policies in the UK, in Europe and a host of other countries across the world has been leaning towards lowering of corporation tax in order to attract multinationals investment in their territories. The debate as to how this lowering of tax, or the new consciousness of the MNEs in their tax planning as a tool for strategic management and competitiveness can shape the future of the local economies, and whether the perceived benefits of inward FDI is still a reality that surpass the negative impacts that such investments may have on local economies and the development and growth of local SMEs are issues that this paper aim to cover. The methodology of this paper is mainly a desk based review of policies and theories of taxation and inward FDI. The literature on theories of taxation in general and corporate taxation in particular will focus on the history of corporate tax and its development, and offers a comparison of the corporation taxation systems in Europe and the US. The paper will then re-examine the perceived positive and negative externalities of the MNEs FDI on local economies against actual benefits confirmed by secondary evidence. The paper is structured in three sections. In the first section, a review of taxation as an economic concept is presented; the history of corporation tax in the UK is reviewed and evaluated; a change towards lowering of corporate tax and the arguments in favour of a lowered tax regime will be examined. This second section reviews the impact of inward FDI primarily from a conceptual point of view and then moves into a systematic review of the literature on the evidence of potential benefits of inward FDI as presented by local governments as justification for favourable policies to entice MNEs to choose their investment locations. The last section will offer a debate on government-multinational interaction and proposes a conceptual framework for assessing the local impacts of national policies by proposing testable hypotheses. It would not be within the scope of this paper to test these hypotheses but it is hoped that by offering such propositions a wider debate on the future role of taxation as a means for achieving welfare goals of sustainable societies.

Item Type: Conference or Workshop Item (Paper)
Identifier: 10.13140/RG.2.1.3492.2089
Page Range: p. 1
Subjects: Business and finance > Business and management > Business ethics
Business and finance > Business and management > International business
Depositing User: Mahtab Akhavan Farshchi
Date Deposited: 18 Jun 2018 08:26
Last Modified: 18 Jun 2018 08:27
URI: http://repository.uwl.ac.uk/id/eprint/5164

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