Multinational Entities Research Articles

An Appraisal of the Challenges and Limitations of Developing African Countries in Negotiations with Multinational Entities and Developed Nations: Proposed Interventions

The paper takes a look at the limitations and challenges that negotiators of developing African countries encounter with multinational entities and developed nations. It identifies that negotiators of multinational and advanced economies appear to be very competitive and confrontational as against negotiators of developing African negotiators, who appear cooperative and collaborative, a soft-styled approach to negotiations, these disparities arise from power, network and resource imbalance. Some of the challenges encountered by African negotiators include aggressive demands, unilateralism and setting self-serving agendas, negative impact of demographic variables as well as intercultural challenges. Others include inadequate cultural intelligence, negotiating process fatigue, political interest and inadequate competent and experienced human resource and financial limitations among others. The Doha declaration points to the fact that weak nations such as African countries and partners, even though may appear as weaker actors can attain a successful negotiated outcome, when in strategic partnership and networks with identified mutual interest and benefits. The paper recommends the need for the establishment of a networked governance strategy, a more formidable one to the TRIPs network, which delivered a BATNA. Within the state and regional levels, African countries must consciously endeavor to provide their domestic institutions such as Foreign Ministries, Trade and Industry Ministries, national negotiation agencies, with the requisite capacities and expertise needed to be very effective and competitive. Good political well of governments is central in avoiding conflict of interest and corruption at the expense of the State for a BATNA. This would enable them to be better prepared with the requisite confidence, knowledge, and skills to negotiate for a better outcome with multinational corporations and nations.

Impact of country governance mechanisms on carbon emissions performance of multinational entities

This study investigates the impact of country governance mechanisms on carbon emissions performance of private sector organisations, using empirical evidence from 336 top multinational entities (MNEs) over a 15-year period. The results show that, at the aggregate level, Control of Corruption (b = −0.021, p < 0.01) and Voice & Accountability (b = −0.015, p < 0.05) are significantly and negatively associated with carbon emissions rate. While Political Stability (b = 0.007, p < 0.05) and Government Effectiveness (b = 0.018, p < 0.05) have significant positive impact on carbon emissions rate, the impact of Regulatory Quality and Rule of Law is negative but insignificant. Empirical evidence supports the conclusion that the existing institutional environment is not sufficient to deliver the net zero transition. There is a need for more coordination, strategic planning, and delivery monitoring in government institutions to achieve decarbonisation targets. The study contributes to knowledge within the context of the identified research gaps. First, the study adds to the limited literature on the impact of country governance on carbon emissions reduction, particularly with reference to scope 3 emissions. Second, with the sustainable development goals (SDGs) set to expire by 2030, the study provides empirical evidence on efforts governments of countries are making in achieving decarbonisation targets through improvement in country governance quality. Third, the study shows that the impact of the country governance on the carbon emissions performance of MNEs is contextual and varies across jurisdictions/geographical regions. Finally, the paper contributes to the debate on the actualisation of Agenda 2030, because presenting empirical evidence on the impact of country governance mechanisms on carbon emissions reduction—particularly scope 3 emissions—is an important discourse in the realisation of the SDGs.

Microplastics in aquatic bodies: Assessing the role of governance mechanisms in industrial wastewater management

The purpose of this research is to examine the association between corporate governance mechanisms (board independence, board gender diversity, Chief Executive Officer (CEO) duality, and environmental, social and governance (ESG) linked compensation) and wastewater recycling as a strategy for managing the flow of microplastics into the aquatic environment. The study analysed an international sample of top companies on the Forbes 500 list over a 15-year period during the millennium development goals (MDGs) and sustainable development goals (SDGs) eras. Multiple regression analysis with fixed effect OLS, two-stage least squares regression, propensity score matching, and logistic regression were applied in the data analysis. The results show that, at the aggregate level, board gender diversity is positively associated with wastewater recycling, whilst CEO duality has a significant negative impact. When disaggregated into industries, board gender diversity is positively associated with wastewater recycling in high-polluting and low-polluting industries. In relation to the MDGs/SDGs eras, the impact of board gender diversity is more significant in the MDGs era than in the SDGs era. At the geographical region level, CEO duality has a significant negative impact on wastewater management in the America and Asia Pacific regions, whilst the effect of CEO duality is significantly positive in the Western Europe region. We also find that a minimum of two female directors is required to improve wastewater management practice. The study concludes that whilst board gender diversity is a notable driver of wastewater management, CEO duality diminishes the commitment of multinational entities (MNEs) to addressing wastewater management issues. Our result is robust to (i) alternative measures of wastewater management, (ii) alternate sample composition, (iii) alternate method of data analysis, and (iv) endogeneity checks. The study contributes to the limited literature on waste management and the circular economy, particularly governance mechanisms’ role in wastewater management in an international context.

On the predictability of bonds

From a global perspective, bonds represent an important source of funding not only for companies but also for governments and multinational entities. Therefore, the analysis of their prices and yields is of long-term interest to academic research. This work deals with the break-even point in the behavior of bond prices, after which they no longer move by random walk based on standard micro and macroeconomic variables but converge linearly to the nominal value. From the investor's point of view, it no longer makes sense to speculate on a significant rise or fall in price after this point, and the bond acquires only a fixed income character. On a sample of 652 bonds listed on the Frankfurt Stock Exchange, we showed that the break-even point is located approximately 400 days before maturity, regardless of the total period of existence of the bond.

Corporate governance and carbon emissions performance: International evidence on curvilinear relationships

This study investigates the impact of corporate governance mechanisms (namely board meeting, board independence, board gender diversity, CEO duality, ESG-based compensation and ESG committee) on carbon emissions performance of multinational entities (MNEs). The study analysed international sample of 336 top MNEs operating in 42 non-financial industries from 32 countries over a 15-year period. Result shows that board gender diversity, CEO duality, and ESG committee are negatively associated with carbon emissions rate, whilst board independence and ESG-based compensation have significant positive impact. Whereas board gender diversity and CEO duality have significant negative impact on carbon emissions rate in carbon-intensive industries, the impact of board meeting, board independence and ESG-based compensation is significant and positive. In the non-carbon-intensive industries, board meeting, board gender diversity and CEO duality have significant negative impact on carbon emissions rate, whilst the impact of ESG-based compensation is positive. Further, there is a negative association between the millennium development goals (MDGs)/sustainable development goals (SDGs) era dichotomy and carbon emissions rate, implying that the United Nations agenda for sustainable development significantly affected carbon emissions performance of MNEs, with the SDGs era generally witnessing better carbon emissions management in comparison to the MDGs era in spite of the higher emissions level in the SDGs era. The study contributes to knowledge in several ways. First, it adds to the limited literature on the determinants of carbon emissions reduction within an international context. Second, the study addresses mixed result reported in prior studies. Third, the study adds to knowledge on the governance factors affecting carbon emissions performance in the MDGs and SDGs periods, thus providing evidence on progress MNEs are making towards addressing climate change challenges through carbon emissions management.

Distortional effects of separate accounting and formula apportionment on factor allocation

We examine distortions caused by tax base allocation systems–separate accounting (SA) or formula apportionment (FA)–with respect to the allocation of assets and workforce within multinational entities (MNEs). The effects of both systems are intensively debated by EU Member States as they are striving to implement a European tax system. Its introduction would lead to a switch from SA to FA. Moreover, Pillar One of the recent global tax reform includes a mix of both tax base allocation systems. We find that, against the claims of the EU, FA does not necessarily create lower distortions of the factor allocation. Decisive for that assessment is the level of profit shifting under SA. Our results indicate that, in tendency, the factor allocation is more severely distorted by FA when the profit shifting possibilities were rather low under SA. In contrast to former studies, we highlight the importance of analyzing the status quo under the recently applied system (SA) in order to be able to assess the consequences of a switch from SA to FA. Our results are interesting for policy-makers as they help anticipating reactions of MNEs to a change in the applied tax base allocation system and for companies as a basis for future tax planning.

Transfer pricing policy concept model for MNEs in relation to strategic management

Purpose: Transactions carried out in MNEs among parent companies and subsidiaries affect the achievement of the strategic and operational objectives of MNEs, their financial results, taxes paid and intra-group relations. The aim of the paper is to justify the need to extend the areas of strategic management in MNEs to include the area of tax, in particular related to the valuation of transactions between entities within a group, and the need to meet the obligations related to transfer pricing. The practical aim of the article is to propose an original transfer pricing policy model for MNEs, which may be adopted to increase the transparency of settlements and have a positive impact on operational and strategic effectiveness within groups. Design/methodology/approach: The paper is based on qualitative research. Content analysis of legal provisions and prior literature was used for the collection of relevant data for building a transfer pricing policy model. Findings: A comprehensive and consistently implemented transfer pricing policy may help in optimizing the tax structure of MNEs, as well as minimizing the risk associated with changes in tax provisions. As an instrument influencing operational relations and performance management in MNEs, it can be a significant element of the strategic management of groups. Practical implications: The research impact upon MNEs is the possibility to apply and adopt the transfer pricing policy model proposed in the paper in order to support performance management within a group. Social implications: The way multinational entities conduct their business is often perceived negatively by society due to issues of tax evasion. The implementation of a comprehensive transfer pricing policy promotes corporate tax transparency and increases employee tax awareness. Originality/value: The originality of the article stems from a coherent combination of various aspects relating to intra-group transactions into one model, which on the one hand supports the management of subsidiaries, and on the other facilitates compliance with Polish and international legal provisions. The proposed model may be subject to further development. Keywords: corporate taxation, subsidiaries, accounting, compliance, tax avoidance. Category of the paper: research paper.

How to Achieve the EU's Climate Goals? A Model Proposal for Multinational Entities Contributing to Fill the Green Investment Gap

How to Achieve the EU's Climate Goals? A Model Proposal for Multinational Entities Contributing to Fill the Green Investment Gap

The Accountant as a Means to Corporate Tax Compliance: Evidence from a Randomized Field Experiment in Ecuador

AbstractTax evasion can be considered as a systemic fraud in which different parties such as taxpayers, lawyers, banks, and multinational entities interact. Here, accountants are key agents owing to their legal liability in tax reporting and their knowledge on accounting rules. The present study analyzes the role that accountants play in firms tax evasion by presenting evidence from a randomized field experiment carried out with microenterprises in Ecuador’s tax system in early 2016. The article evaluates to what extent a notification of accountants is more effective in increasing tax reporting than a notification of taxpayers, through five different treatments. The results show that simultaneous persuasive notifications of both accountants and taxpayers were the unique treatment that significantly increased firms’ declared income tax. Furthermore, it was shown that penalty notifications of accountants, rather than taxpayers only, were the most significant treatment at reducing revenue underreporting.

Конфіденційність податкової інформації, що підлягає автоматичному обміну: імперативи забезпечення

OECD governments are working together to address important issues of rapid response to the use of aggressive tax planning and transfer pricing by multinational entities (MNE). Activities in the area of transfer pricing lead to the erosion of the tax base – the state does not receive adequate tax revenues. World practice shows that transfer pricing needs to be regulated. The OECD provided recommendations, including on the establishment of mechanisms for the administration of transfer pricing, the definition of basic requirements for documentation on transfer pricing and the exchange of tax information. As a result of the involvement of more and more countries in the global exchange of tax information, in recent years the problems of ensuring the confidentiality of information to be exchanged have become important. The OECD provides governments with the opportunity to share experience, identify best practices and coordinate activities in the context of the mentioned issue. Ukraine is actively involved in these processes, which highlight the introduction of a number of tools to establish the functioning of international automatic exchange and ensure the confidentiality of tax information. The latter causes further implementation of relevant OECD model legislation. The analysis of international approaches and best practices for ensuring confidentiality and an appropriate level of protection of information exchanges between OECD member states on the issues of the BEPS Action Plan implementation and identification of imperatives for their application are performed. The research is based on a synthesis of general scientific methods, methods of comparison, institutional analysis and empirical approach. The OECD recommendations and the national legislation of certain countries, which contain provisions for ensuring confidentiality and protection of tax information to be exchanged are summarized and systematized. According to the results of the study, various tax administrations are guided by the recommendations of the OECD model legislation within the development of a mechanism to ensure the necessary level of confidentiality and effective protection of tax information to be exchanged. But there are some national pecularities and obstacles for implementation of OECD model legislation.

ANALISIS PENYELESAIAN ISU PEMAJAKAN EKONOMI DIGITAL: STUDI KASUS GOOGLE ASIA PACIFIC Pte Ltd.

Digitalization raises taxation issues for the market jurisdiction authority including Indonesia, both on the aspect of direct taxation and indirect taxation, due to the capability of the digital multinational entities (MNEs) to avoid physical presence to exercise a transaction with the customer in the market jurisdiction. In terms of indirect taxation, issues raised by Google Asia Pacific Pte Ltd (Singapore) related to the business to customer (B2C) model on service and intangible transactions to the consument in Indonesia, especially the nonregistered taxable business consument (nonPKP). In general, the consumption of services and intangibles from abroad by resident in Indonesia is taxed using the mechanism of reverse charge. Due to its ineffectivity and ineffeiciency at the implementation, in 2020, Indonesia government appointed several nonresident MNE including Google Asia Pacific Pte Ltd (Singapore) to collect the VATs. Meanwhile, issue in direct taxation raised by Google Asia Pacific is due to the provision of Indonesia and Singapore tax treaty that still oblige the degree of physical presence to measure the existence of permanent establishment. After the publication of BEPS Action 1: Final Report (2015), the Indonesian government has made several policy decisions, both in terms of domestic regulations to the international realm, such as the signing of multilateral instruments (MLI) and tax treaty negotiation. In addition, currently a negotiation is underway regarding the consensus on digital economy taxation proposals known as the two pillars. One of the proposals initiated was the first pillar proposal (unified approach) which focus on updating rules related to nexus and profit allocation. The purpose of this study is to identify the alternative for VAT and income taxation against Google Asia Pacific Ltd by considering the principles of international taxation. The research used qualitative method with a case study approach. The research data were collected using literature study.

ОБУЧЕНИЕ ГРАММАТИКЕ НА ОСНОВЕ ПРОБЛЕМНО-ПРОЕКТНЫХ ЗАДАНИЙ В УСЛОВИЯХ ПОЛИКУЛЬТУРНОГО СОЦИУМА (НА ПРИМЕРЕ РЕСПУБЛИКИ КАЗАХСТАН И РЕСПУБЛИКИ БАШКОРТОСТАН)

The article gives the characteristics of the current language situation in the policultural republics, where much attention is paid to foreign language education. The examples of the implementation of polylingval education are the Republic of Bashkortostan as one of the multinational constituent entities of the Russian Federation and the Republic of Kazakhstan, which are multinational in their essence and bilingualism in them is considered to be natural. Nevertheless, in both republics the contradiction between the high levels of requirements for the formation of grammatical skills imposed by the curriculum and the inability of students to freely use grammatical structures in the process of communicating real communication is obvious. To optimize the process of learning grammatical means of communicative competence, the technology of the formation of grammatical skills is proposed on the basis of the use of problem learning elements, in particular, problem-project tasks. These tasks are considered in the article as special tasks that create problem situations, during performing which students are involved in creative speech foreign project activities, the result of which is the tangible product. The problem-project approach is proposed in the article as a methodological basis for the formation of the grammatical side of communicative competence in the native, Russian and one of the foreign languages acquisition of the student. The main subject of consideration is the issues of the formation of foreign language grammatical skills of students in three-tie conditions. The authors analyze the methodology for learning foreign language grammar based on the use of problem-project tasks with a support for native, Russian and English languages. As an example, the technology of comparison of Russian, Bashkir, Kazakh, English and French proverbs and sayings is described.

TAX CHALLENGES OF DIGITAL ECONOMY IN INDONESIA

E-commerce transactions emerged as a consequences of the new virtual business model that is used by some multinational entities expanding their business operations abroad in the international landscape. This study aims to explore ecommerce taxation in Indonesia including some factors like understandings and tax payer’s opinion of e-commerce taxation and current rule and tax mechanism of ecommerce which are supporting the implementation of e-commerce taxation. Factors studied related to taxation of e-commerce, including mechanism, monitoring system, and e-commerce transaction. Interviews were conducted from the side of fiscus (Directorate General of Taxation) and taxpayers in e-commerce industry. Data collection was used semi-structured interview, observation, and documentation. Data analysis of this research was descriptive method. The result of this study proves that taxation in e-commerce industry has not been implemented in a good manner. Socialization to e-commerce taxpayers should be conducted in more structured and comprehensive ways. Difficulties in the detection of e-commerce transactions bring its own problems, this is the biggest challenges in e-commerce transactions, namely the difficulty of the government to establish a clear and fair e-commerce tax rules. Recent government rule in November 2019 which accommodate economic substance from Unified Approach of OECD gives refreshment to those difficulties.

Corporate Income Taxation and Inequality: Review and Discussion of Issues Raised in The triumph of injustice—How the rich dodge taxes and how to make them pay (2019)☆

This article surveys the literature on the relationship between corporate income taxation and inequality through the lens of the recent book The triumph of injustice—How the rich dodge taxes and how to make them pay by Saez and Zucman (2019). First, we analyze the nexus between corporate taxation and inequality by reviewing both studies that highlight the curbing effect of corporate tax on inequality, and by examining studies claiming that more corporate taxation might paradoxically raise personal inequality. Then we proceed by identifying current practices in taxing multinational entities, and provide an overview of the latest estimates on nations’ missing fiscal revenues. Finally, we discuss the policy proposals put forward by Saez and Zucman (2019) to reform corporate taxation at the global level through the introduction of a global corporate minimum tax.

Why Not Replace GDP?

This is a comment on Katharina Lima de Miranda and Dennis Snower’s multidimensional approach for the assessment of human well-being. It applauds the authors for looking “beyond GDP” but urges them to go one step further and replace GDP as a measure of material well-being by growth national income and actual individual consumption. Unlike GDP, these alternative measures for material well-being can be used to single out activities by multinational entities that are largely unrelated to domestic well-being. I will show that multinational entity activities, like the relocation of corporate headquarters and IP assets to Ireland and Luxembourg, have grown in such a substantial way in recent years that they can bias assessments of both material and human well-being.

Greenhouse Gas Emissions, “Event Attribution” and Locus Standi in Foreign Courts

The liability of multinational entities that have caused greenhouse gas emissions through their extraction activities in the fossil fuel industry has pushed climate change on to the international agenda. Those corporations now face challenges from litigants who have initiated negligence or nuisance actions for breach of duty of care. Suits against individual corporations are now possible due to the development of attribution science that can register the extent of each liability. Litigants from third-world countries have to satisfy locus standi in bringing claims which is difficult to establish in some jurisdictions. For example, in Lliuya v. RWE, (Az. 2 O 285/15, OLG Hamm) 24/1/2017, a South American farmer brought a claim in Germany against RWE-AG, Germany’s largest electricity producer, to challenge the effects of greenhouse gas emissions from its plant in Peru. This paper asks: Is it possible for foreign litigants to bring a private tort action against the defendant corporation that has allowed greenhouse gas emissions, in that corporation’s domestic courts, and to surmount the obstacle of locus standi? It concludes that it is possible for litigants from developing countries to litigate effectively because the foreign courts’ statutory protections, such as the doctrine of separation of powers or political rights doctrine can be overcome if climate litigation is viewed as a human rights matter. The prospects of success of litigants has increased by the impact of event attribution science that can quantify the extent of private actor liability in climate change.

Unravelling processes of alliance capability development: longitudinal processual insights from an emerging country multinational enterprise

PurposeThe purpose of this paper is to explore and unbundle the complex processes underpinning development of alliance capabilities, particularly in the context of emerging country multinational enterprises. More specifically, this paper focuses on how firms internalize and translate knowledge generated from experiences gained by participating in international collaborations.Design/methodology/approachThe authors adopt an exploratory case study approach to undertake in-depth processual analysis of alliance capability development in an Indian biopharmaceutical company. The authors focused their analysis on the initial four international alliances the company formed and identified key elements pertaining to alliance capabilities that the company internalized and those that it could not, as this was key in understanding alliance capability.FindingsThe research shows that based on experiences from previous alliances, the Indian organization was able to overhaul its negotiation and governance designing processes and practices as well as made robust changes to its internal communication and coordination practices. Interestingly, the company organization, however, did not make any significant changes to its processes and practices regarding partner selection.Practical implicationsThe results from our study can be used by managers to develop processes and practices when it comes to developing alliance capabilities.Originality/valueThe paper is novel, as it addresses two specific gaps in the nascent alliance capability literature. First, it provides insights on how different constituent elements/aspects of alliance capability actually develop and integrate within the organizational system over time, and in the process, the paper identifies that some aspects are better internalized as compared to other aspects. Second, by focusing the attention on an Indian biopharmaceutical company, the authors attempt to address a gap in alliance capability development research, which has been neglected in emerging country multinational entities.

Implementation of Gender Policies by the Private Sector in the UAE: Challenges and Opportunities

The United Arab Emirates (UAE)’s “Vision 2021” set a deadline for the country to become one of the top 25 countries in the area of gender equality by the end of that year, with the government launching a gender balance program to achieve this goal. However, the private sector faces challenges in the implementation of these national gender policies. Even with country’s multinational entities leading the way for gender equality in the private sector, implementing the new gender policy is challenging. This study demonstrates the ways in which cooperation between private sector entities and the government is often dysfunctional. Testimony from 10 interviews with professionals in UAE-based companies suggests that businesses face problems implementing gender-balancing policies due to a lack of transparency, reporting, and accurate data on gender issues within both the private and the public sectors. The study concludes that businesses require greater guidance and more transparent measures to be able to advance gender equality issues in the UAE.

Analisis Kesiapan Otoritas Pajak dalam Pemajakan atas Ekonomi Digital

The patterns, forms of human behavior and the presence of many new forms of business today such as e-commerce, payment services, application services, online advertising, cloud computing, high frequency trading, participative networked platforms are influenced by the digital revolution as formulated by the OECD. Social phenomena as an effect of the rapid development of information and communication technology (ICT) known as the digital economy will certainly also change the patterns of business individuals and organizations throughout the world. With the presence of various new business models, there are many opportunities for tax avoidance schemes that are usually dominated by multinational entities (MNE). Based on this, the OECD recommends several action plans, one of which is about the digital economy. The need to detect the digital economy by the tax authorities of world countries such as Indonesia is now very large. Related to this the Indonesian government issued a unilateral regulation namely Perpu Number 1 of 2020 which later became Law No. 2 of 2020, one of which regulates taxation of the digital economy. The Indonesian tax authority seeks to respond to the dynamics of the internal and external environment called organizational readiness. This study wants to analyze whether the Indonesian tax authority is ready to tax the digital economy.

Імплементація міжнародних рекомендацій щодо запровадження трирівневої моделі документації з трансфертного ціноутворення в Україні

The article considers challenges and consequences of introducing a three-level model of transfer pricing documentation in Ukraine. The purpose of study is to assess the state of regulatory support for implementation of Step 13 of the BEPS Action Plan and to identify institutional measures for further implementation of three-tiered documentation on transfer pricing, taking into account the requirements of the Organization for Economic Co-operation and Development (OECD). The authors analyzed the state of accession of countries all over the world to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, in order to counteract the erosion of the tax base and the withdrawal of profits from taxation of the OECD, ratified by the Law of Ukraine dated 28.02.2019 No 2692-VIII. Analysis of national legislation to take into account the requirements of the BEPS Action Plan and the experience of cooperation of the Government of Ukraine with international tax organizations allowed to scientifically substantiate the directions of improvement of national regulations on tax issues and to determine methodology for application of innovative reporting form in the context of further implementation of BEPS Action Plan. It is identified that implementation of a three-tiered reporting model for transfer pricing in Ukraine is at the beginning of the development, in particular legislation. The authors emphasize the importance of counteracting information asymmetry by ensuring the unification of terminology and quality of the database for innovative reporting preparation, in particular, for global documentation on transfer pricing, transfer pricing documentation and Country-by-Country reporting of multinational entities. Within the study it was proved that the organization of the reporting process at all levels of the Three-Level Model of transfer pricing documentation (hereinafter the Three-Level Model) should be aimed at preparing reports that contain reliable information with the maximum exclusion of duplication.