Abusive Tax Planning of Transnationals and the Erosion of Tax Bases

between Legality and Morality

Abstract

The globalization process has changed the way in which civilizations relate to each other. In the field of economy, there was a globalization of capital and trade relations, raising competition at a global level and giving rise to transnational companies. In this context, international tax planning, while becoming a requirement of the competition logic, improves progressively and quickly. On the other hand, the International Tax System, built under an internal economic logic, was not prepared for the new dynamics of capital. It continued to provide answers at the domestic level to global problems and, as a result, transnational companies were allowed to explore the normative inconsistencies between the different legal systems. In the end, the phenomenon has caused an erosion of tax bases and going against the grain of tax justice. This article is justified by the indispensability of discussing the topic to world society, as it seeks to contribute to the protection of what is the basis of modern civilizations: the tribute. Therefore, it focuses on the questionable strategies used by transnational companies, seeking to better understand them. A qualitative and exploratory methodology is used, using a literature review as a technical procedure and adopting the deductive method. In conclusion, it is understood that, although the tax plans of transnational corporations seek to be lawful, they, in many situations, violate the ethical content of Tax Law. As they move away from the typical object of exploration of the business activity, they distort the operational economic substance with the sole purpose of reducing the tax burden. Finally, it is understood that the solution to the problem involves three aspects: an approximation of Tax Law with Tax Morality, stimulating the individual conduct of companies through concepts such as Corporate Social Responsibility and responsive regulation, guiding normative production suited to contemporary needs; the move away from a formalistic interpretation of norms and, finally, democratic multilateralism.