The global problem: tax

How to collect taxes from multinational cooperation has been a big problem for many countries around the world, since multinational companies have so many ways to dodge taxes. According to the study by the IMF and the University of Copenhagen, nearly 40% of worldwide foreign direct investment is for minimising companies’ tax liabilities. There are several institutions and governments studying how to effectively tax these multinational companies.
 For governments, they do not only need to consider how much money they are able to collect from companies, they also need to consider how many jobs these companies create. Any move to increase their abilities to collect money from companies is likely to reduce these companies’ business activities in their countries, so the jobs created by these companies tend to decrease. Therefore, multinational companies have enough bargaining power when negotiating with governments.
Because multinational companies can create significant numbers of jobs for some districts in one country, it can have influence over district representatives in the political system thus influencing law-making especially the tax law. This makes the process of law making to strengthen central governments’ abilities to collect taxes from multinational countries weaker when central governments do not enormous power in the law-making process.