Tax Avoidance, Revenue Starvation and the Age of the Multinational Corporation

The International Lawyer (Forthcoming)

Suffolk University Law School Research Paper No. 16-18

61 Pages Posted: 14 Dec 2016

Date Written: December 13, 2016


This article is a response to the current crisis in global tax avoidance, particularly by multinational corporations. Recent revelations, including “Luxleaks” and Panama Papers, have made clear that tax avoidance is occurring on a massive scale all around the world. Both wealthy individuals and large corporations have pursued increasingly audacious ways to avoid paying tax in any jurisdiction. In the quest for tax avoidance, large corporations in particular have been assisted by both “creative” tax accountants in the big firms, and also by friendly legal environments fostered by national governments.

Globally, both developed and developing countries lose billions of dollars in revenue to corporate tax avoidance every year. There is nothing secret about this fact any longer. Indeed, all of these legal and accounting devices have been well documented in many publications, and most boil down to the fact that corporations have found ways of attributing profits to low or no-tax jurisdictions in which the profits were not really earned. Prominent works like Gabriel Zucman’s The Hidden Wealth of Nations: The Scourge of Tax Havens explains in detail how governments everywhere are hemorrhaging revenue that remains tied up in tax havens.

However, the real news, and the unexplained aspect of this problem, is why it has taken so long for governments to alter the legal regime governing the taxation of corporate profits. As has been made clear by Joseph Stigliz and other economists, the legal solution to the tax avoidance dilemma is simply not that complicated: With sufficient political will, governments could, collectively or individually, find a formula to attribute profits to the jurisdiction in which the profit was derived, and tax it accordingly. The reason this has not occurred is not a technical one, but rather a political one. This article explores initiatives to date, emanating from the OECD, the EU and the US, and argues that the slow pace of reform indicates that corporations exert far overwhelming influence in the field of international tax law and policy -- far more than ordinary citizens.

The article concludes with an examination of the recommendations made by the Independent Commission for the Reform of International Corporate Taxation, of which Joseph Stiglitz is a key member, calling on governments to insist that taxes are paid by corporations in the jurisdictions where the profits are actually made. The article argues that enough is already known about the technical devices used by corporations to avoid tax. The time is ripe for legislative action and for serious international cooperation to realign corporate profits with reasonable levels of taxation.

Suggested Citation

Dillon, Sara A., Tax Avoidance, Revenue Starvation and the Age of the Multinational Corporation (December 13, 2016). The International Lawyer (Forthcoming); Suffolk University Law School Research Paper No. 16-18. Available at SSRN:

Sara A. Dillon (Contact Author)

Suffolk University Law School ( email )

120 Tremont Street
Boston, MA 02108-4977
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics