GLOBAL BUSINESS NETWORK: OFF-SHORE MODEL’S DIVERSIFICATION AND IMPACT

Abstract

Modern literature lacks systematization and assessment of impact of network of international corporations and their off-shore models on development of national economies in post-industrial times. There is variety of tools besides well-known multinational corporate accounting policies and strategies of MNCs that provide mechanism for the management of transaction costs in reporting period, thus reducing the amount of taxable profit due to application of the method of accelerated depreciation and channels of tax deferrals, which allow to reduce corporate tax payments owing to the objective reduction of real purchasing power of money over time. The purpose of the article is to propose in-depth systematization of balanced pros and cons for further development of national FDI policies aimed at network of MNCs. The paper utilizes a compound methodology of review and systematization to calculate overall impact of offshoring that exceeds 1% of global GDP. While modern financial and economic activities of MNC’s distinguish both internal and external offshoring, the paper focuses upon endogenous one. The key attention is on dominant ones – tax inversion phenomenon is known as base erosion and profit shifting, tax planning strategies, international debt shifting, models of tax treaty shopping, tax deferral, tax hybrids, strategic transfer pricing tools. In business and financial management MNCs resort to the development of extremely complex network structures of parent and subsidiary companies in order to increase international competitive advantages. MNCs make special efforts to recruit staff capable of effectively performing key functions in the field of corporate offshoring. We find huge regional asymmetries in MNCs impact on development of national economies. On one hand, a number of highly profitable corporations pay almost zero tax in favour of their countries of registration; on the other, MNCs create jobs, markets, volumes and asymmetries of geographical structure of differences in the value of goods and services supplied through international trade between developing and developed countries due to enormous scale of business offshoring.

Keywords

• offshoring
• tax inversion
• profit shifting
• tax planning
• strategy
• MNC