Recently newspapers and broadcasters have become very keen on investigating and exposing tax practices of multinationals, but this is nothing new. The practice of minimising tax liabilities has been going on for decades. We hear explanations with multinationals citing contributions via employment tax (National Insurance in the UK) and VAT. This is a lame excuse dreamt up in the Multinationals PR departments which indicates the level of desperation at Multinationals HQs and their desire to limit the damage to their brands. Governments have been complicit in this and are being caught out by the speed and ferocity of the public response.
This article aims to clarify and add an insight into these practices. Additionally, in my view, these practices not only deprive governments of tax revenues but are fundamentally distorting the principal of free market and threaten local manufacturer, suppliers, and jobs. In simple terms, if you are a local supplier that only operates in one country, then your multinational competitors have an unfair competitive advantage.