Tax Implications of Offshore Financial Centres (OFCs): A Case-based Study

Offshore Financial Centres (OFCs) provides for various strategies to the multinational corporations to mitigate tax payments. OFCs also used to provide other benefits to the MNCs like simple incorporation process, little supervision and high degree of client confidentiality. Large firms are expanding their operations internationally as a result of globalization, carefully considering the potential tax implications on their generated income. In this paper, attempts have been made to provide for an insight of the concept of the OFCs and how MNCs use them to avoid tax payments. The scenario and mechanism of reducing tax liabilities by the MNCs is depicted with the help of three case studies of Microsoft, Vodafone and Amazon. In order to address the taxation issue comprehensively, the BEPS strategy typically identifies fifteen actions and provides justification for a mark to be applied to the activities of the MNCs. The study shows that OFCs are often used by the multinational corporations for their tax benefit purpose.