Abstract
You don’t have to be a CPA to introduce the basics of international taxation into your IB course. There is no shortage of materials and methods that are available to IB instructors including cases, videos, simulations, teaching notes, and articles in the practitioner press. International tax is a provocative, controversial topic which engages students academically and emotionally. Students read of MNEs which pay little tax and want to know: How do they do it? Why are they getting away with it? Furthermore, international tax is synergistic with other IB topics as how business differs when traversing borders and MNE-government bargaining.
Highlights
Looking for a good reason to introduce international tax into your IB course? Let me give you five
Transfer pricing enters a “grey area” when you introduce intangible assets and MNE income shifting activities and structures. One example of this tax avoidance structure is the “double Dutch-Irish sandwich” (Figure 2), in which a parent company’s IP is transferred at a low value to an Irish incorporated subsidiary located in a tax haven, who in turn licenses the IP under a royalty agreement to an operating company in Ireland, and the Irish operating company funnels royalty payments back to the Irish subsidiary through an intermediate company in the Netherlands (Fuest, Spengel Finke, Heckemeyer, & Nusser, 2013; UNCTAD, 2015)
Because of a reluctance to overhaul the tax code, we observe a continuous cycle of (1) MNEs exploit a loophole in the tax code to reduce taxes, (2) governments pass tax legislation to plug the loophole, (3) MNE tax lawyers find another loophole in the tax code, and (4) go to step 1. After these basics of corporate income tax law, I turn the students’ attention to what MNEs do to avoid taxes. This leads to an explanation of “corporate inversions,” an MNE from a worldwide tax system home country “changing” its home country by moving its headquarters to a tax haven
Summary
Transfer pricing enters a “grey area” when you introduce intangible assets and MNE income shifting activities and structures. One example of this tax avoidance structure is the “double Dutch-Irish sandwich” (Figure 2), in which a parent company’s IP is transferred at a low value to an Irish incorporated subsidiary located in a tax haven, who in turn licenses the IP under a royalty agreement to an operating company in Ireland, and the Irish operating company funnels royalty payments back to the Irish subsidiary through an intermediate company in the Netherlands (Fuest, Spengel Finke, Heckemeyer, & Nusser, 2013; UNCTAD, 2015). The intermediate company is inserted as the Netherlands does not impose withhold-
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
