For multinational corporations, OFCs provide opportunities for “profit laundering”, carrying out transactions that assign profits and losses on paper according to where taxes can be minimised. Profit laundering is frequently done through offshore shell companies that have no function other than holding corporate assets.
To conceal profits a company might transfer the ownership of patents, copyrights or other intangibles to offshore shell companies and collect royalties in a low-tax jurisdiction. Earlier this year, the pharmaceutical company Merck was assessed $2.3 billion in US back taxes for transferring its drug patents to a Bermuda shell company and then deducting from its taxes the royalties it paid itself. High technology companies such as Microsoft are engaged in similar strategies. Read More..........
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