Finance and Accounting

In the Stanford video, the professor was asked the question, “Is corporate income shifting fair?” What’s your thought on this question and her answer?

First, I want to identify the nuance between "fair" and "legal." We, of course, understand that corporate income shifting is legal. These organizations are not doing anything wrong from a legal perspective. However, I can't agree with these actions from a societal perspective. U.S. citizens, who do not own a business, cannot take advantage of this global tax incentive. For those Americans who own their own small business, while they can educate themselves on how to take advantage of these tax havens, they may need more resources to hire the appropriate tax team to execute these transactions according to the tax code. So, this becomes an opportunity for only the largest corporations to take advantage of income shifting. This is a small percentage of the American population that has access to benefit from this tax code. This becomes hard to rationalize when most Americans must pay their fair tax share while a small segment of the wealthiest businesspeople does not.

At a time when we see the wealth gap increasing more drastically between the CEO and the average employee, it is tough for me to defend corporate tax shifting. These savings are not serving the greater good by hiring more employees or providing raises across organizations- they are lining the pockets of a subset of business leaders.

Malta has the lowest foreign corporate tax rate in the whole EU (as low as 5%) and has traditionally been considered as a tax haven. Why did Malta embrace the blockchain technology so feverishly as a pioneer country? Will blockchain help curbing tax evasion by multinational corporations, or simply making it worse?

Malta became the fastest-growing economy in Europe by embracing blockchain and crypto. 20% of their labor force moves to the nation from abroad for opportunities to work in this growing industry. By establishing themselves as the first country in the world to have crypto regulation, they have a first-mover advantage in attracting the best companies to move to their nation. Malta establishing crypto regulations is helpful to the industry because it makes it more credible for people to want to take part if the government supports and regulates the industry. The nature of cryptocurrency is that it is independent of government currency, so, ultimately, crypto doesn't require government regulation beyond helping to gain credibility. I fear that tax evasion by multinational corporations will become easier because regulation will be lax compared to the current American system.