Sample Article Review Paper on Tax Heavens: International Tax Avoidance and Evasion


There has been a high rate of tax evasion by large multinational companies in the US. The companies are evading taxes by transferring their business to foreign countries with relatively low corporate tax than the US (Gravelle 2). Some of the big companies that have shifted their headquarters abroad to avoid taxes include Cooper Industries, Noble drillings and Stanley works. Some multinational companies are also shifting their profits from high tax jurisdictions to low tax jurisdictions and debts and expenses from low to high tax jurisdiction. The reason why companies shift their profit to low tax jurisdiction is that the tax on the income of foreign subsidiaries is relatively low and can only be taxed if it is US parent company as a divided. Hence, some companies are able to avoid US taxes indefinitely. Firms also evade taxes by failing to report profits earned abroad. Currently, statistics show that US lose between $40 billion and $70 billion annually through tax evasion and avoidance (Gravelle 5). There is a proposal to amend the current tax law to minimize tax evasion and avoidance by multinational companies. Other proposals include increasing penalties for tax evasion and shifting the burden of proof to the taxpayer (Gravelle 9).

Ethical Analysis

The action by large multinational companies to relocate their business operations abroad is legal. The reason given by most companies to relocate abroad include expanding their operations, to look for new markets, and to lower operational cost by moving close to sources and market. When extending their operations abroad company mainly use mergers and acquisition greenfield investment. A merger is when two companies join merge together to operate as a single entity. The acquisition is when a big company purchase or acquire a small country in a foreign country while Greenfield investment is where a company establish an industry in a foreign land. Although the reasons for cited for expanding their business abroad are valid, most companies are relocating abroad with the intent of evading taxes.

Although moving abroad is legal, in my opinion, the actions by multinational companies are unethical. Evading tax is unethical since the companies avoid paying their fair share of taxes to the US government (McGee, Yoon, & Li 166). As noted, the government loses about&100 billion annually through tax evasion by multinational companies.  If the companies can pay their fair share of taxes, the government can be able to offer basic social services that can raise the standards of the poor. Additionally, companies operating in the US utilize security, transport infrastructures such as roads and rails, water services, and other social amenities that are provided by the government. The government use taxes collected from citizens and corporate bodies to facilitate these services. Evading tax is unfair since the companies fail to pay for infrastructures and social amenities that support their business operations.

Evading tax by relocating to low tax jurisdiction is also unethical because the companies increase the unemployment rate in the country. When a company shifts its operations abroad, many people lose their jobs and are unable to sustain their families. When a company relocates abroad, it stops offering corporate social responsibilities, which are essential in promoting national development as well as improving the livelihood of the surrounding communities. Thus even if shifting companies operation abroad is legal, it is ethically wrong since it affect the government as well as its citizens (McGee, Yoon, & Li

Works cited

Gravelle, Jane G. “Tax Havens: International Tax Avoidance and Evasion.” (2015).

McGee, Robert W., Yeomin Yoon, and Ye Li. “The Ethics of Tax Evasion: A Comparative Study of Chinese and US Opinions.” Indonesian Journal of International & Comparative Law 2.1 (2015): 161-186.

Webber, Stuart. “Escaping the US Tax System: From Corporate Inversions to Re-Domiciling.” Tax Notes International 63.4 (2011): 273-295.