Global business network: off-shore model’s diversification and impact
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Date
2020
Journal Title
Journal ISSN
Volume Title
Publisher
Izdevnieciba «Baltija Publishing»
Abstract
Modern literature lacks systematization and assessment of impact of network of
international corporations and their off-shore models on development of national
economies in post-industrial times. There is variety of tools besides well-known
multinational corporate accounting policies and strategies of MNCs that provide
mechanism for the management of transaction costs in reporting period, thus reducing
the amount of taxable profit due to application of the method of accelerated depreciation
and channels of tax deferrals, which allow to reduce corporate tax payments owing to
the objective reduction of real purchasing power of money over time. The purpose of
the article is to propose in-depth systematization of balanced pros and cons for further
development of national FDI policies aimed at network of MNCs. The paper utilizes a
compound methodology of review and systematization to calculate overall impact of
offshoring that exceeds 1% of global GDP.
While modern financial and economic activities of MNC’s distinguish both internal
and external offshoring, the paper focuses upon endogenous one. The key attention
is on dominant ones – tax inversion phenomenon is known as base erosion and profit
shifting, tax planning strategies, international debt shifting, models of tax treaty
shopping, tax deferral, tax hybrids, strategic transfer pricing tools. In business and
financial management MNCs resort to the development of extremely complex network
structures of parent and subsidiary companies in order to increase international
competitive advantages. MNCs make special efforts to recruit staff capable of effectively
performing key functions in the field of corporate offshoring.
We find huge regional asymmetries in MNCs impact on development of national
economies. On one hand, a number of highly profitable corporations pay almost zero
tax in favour of their countries of registration; on the other, MNCs create jobs, markets,
innovations and FDI, which outweighs negative impact. We find fluctuations in growing volumes and asymmetries of geographical structure of differences in the value of goods
and services supplied through international trade between developing and developed
countries due to enormous scale of business offshoring.
Description
Keywords
offshoring, tax inversion, profit shifting, tax planning, strategy, MNC, budget, capital, double taxation
Citation
Stoliarchuk Ya. Global business network: off-shore model’s diversification and impact / Yaroslava Stoliarchuk, Denys Ilnytskyy, Glib Turolev // Economics & Education : scientific journal / ISMA University ; [ed. board: D. Djakons (chief) et all]. – Riga : Baltija Publishing, 2020. – Vol. 5, Iss. 2. – P. 20–29.