Week 8 Paper

Memo To: [Manager's Name] From: [Your Name], Staff Accountant Date: [Date] Subject: Summary and Insights on Corporate Taxation in Multinational Enterprises Dear [name of recipient], I hope you are doing well. Following the request you made last week, I have reviewed the queries you sent and hope to provide some clarification and insights to them. As such, this memo summarizes the critical aspects related to income shifting, international headquarters relocation, and the role of tax-related formal institutions in multinational enterprises (MNEs) while also providing strategic advice and an external reference for a broader context. 1 Income Shifting Concept One of the heavily utilized yet misunderstood concepts by taxpayers is income shifting. Income shifting is one of the tax strategies employed by MNEs to reduce overall tax burdens. Although there may be different methods to do this, one of the most common methods is transferring profits from high-tax jurisdictions to low-tax ones, typically through pricing mechanisms in inter-company transactions. In fact, recent studies show that income shifting is highly favored, as evidenced by the differences in intra-firm exports between the United States and other lower-tax countries.[Deng, Z., & Laux, R. C. (2021). Income shifting and US international trade in goods statistics. Journal of Accounting and Public Policy, 40(5), 106853.] 2 Tax Policies to Restrict Income Shifting To achieve your goals, consider various policies to restrict income shifting, such as tightening transfer pricing regulations and implementing global minimum tax rates. These policies are implemented not only to protect the state's revenues but also to protect individual taxpayers, which is the reason why a balance between compliance and strategic ta...