Question

Globalization can also have a significant negative impact on taxation. since many companies are able to trade with one country while being based in another, large corporations often exploit tax havens such as luxembourg, switzerland, and hong kong to avoid paying taxes in the countries where they generate their profits. True / False

Answer 1

True. Globalization can have a negative impact on taxation as many companies use tax havens to avoid paying taxes in the countries where they generate their profits.

Step-by-step explanation:

True.

Globalization can have a significant negative impact on taxation. Many companies take advantage of tax havens like Luxembourg, Switzerland, and Hong Kong to avoid paying taxes in the countries where they make their profits. This practice allows large corporations to exploit tax loopholes and reduce their tax burdens, which can result in reduced tax revenue for the countries where they operate.

For example, a multinational corporation may set up a subsidiary in a low-tax jurisdiction and transfer its profits and intellectual property rights to that subsidiary. By doing so, the corporation can shift its tax burden away from the countries where it generates its profits, resulting in lower tax payments.

Overall, the ability of companies to trade with one country while being based in another enables them to exploit tax havens and avoid paying taxes in the countries where they generate their profits.