Tax Heavens: Methods and Tactics for Corporate Profit Shifting

Taxes paid to governments are among the most significant costs incurred by businesses and individuals. Tax planning evaluates various tax strategies in order to determine how to conduct business (and personal transactions) in ways that will reduce or eliminate taxes paid to various governments, with the objective, in the case of multinational corporations, of minimizing the aggregate of taxes paid worldwide. Well-managed entities appropriately attempt to minimize the taxes they pay while making sure they are in full compliance with applicable tax laws. This process—the legitimate lessening of income tax expense—is often referred to as tax avoidance, thus distinguishing it from tax evasion, which is illegal. Although to some listeners’ ears the term tax avoidance may sound pejorative, the practice is fully consistent with the valid, even paramount, goal of financial management, which is to maximize returns to businesses’ ownership interests. Indeed, to do otherwise would represent nonfeasance in office by corporate managers and board members.