A CASE FOR DEVELOPING NATIONS
Trans-national Corporations (TNCs) around the world trying to avoid taxes is common knowledge. The existing international taxation regime, structured around the principles of arm’s length and separate legal entity, allows TNCs to systematically avoid taxes by playing with the transfer pricing rules and utilizing offshore tax havens. The developing nations suffer gravely. Currently, the developing countries have a mere 10% to 20% proportion of their GDPs in tax revenue, while the OECD countries have 30% to 40%. Even the revenue collection to estimated revenue potential ratio is lower than those in the OECD countries. Between 2005 and 2007, while Argentina, Brazil, China, India, Indonesia, Mexico and South Africa together lost a total of £119.5 billion in capital flight to the
EU and the US, the poorest countries in the world lost £5.78 billion.
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