IEB Report

Political Economy

Taxation, multinationals and foreign direct investment

IEB Report 2/2016

The globalization process has increased the mobility of firms across state boundaries.Yet, the combination of multinational firms, the low degree of tax harmonization and imperfect information sharing between countries has had far-reaching effects on corporate taxation1.Today, it is more than evident that the taxation of multinationals has become an issue of broad social concern. For instance, in Spain, the relatively low tax bills paid by companies such as Apple, Google and Amazon have attracted considerable media attention2. In the UK, customers have boycotted Starbucks because of the company’s tax avoidance practices3. At the same time, a number of policy responses have been recorded. Some countries have adopted policies to clamp down on the tax avoidance practices of large corporations, while the European Commission is fighting tax ruling agreements between large multinationals and tax havens4.