In order to get multinationals to stop avoiding tax, you need to understand how the system for taxing companies works, and how multinationals can exploit it. Companies, large and small, are meant to pay tax on their profits (in the UK, at a rate of 19%). Multinationals (which are companies that operate in more than one, and sometimes hundreds of countries), are effectively split up into a different company (or ‘subsidiary’) in every country they work in.
Each country in which the multinational operates has the right to tax the multinational’s subsidiary in their country. In a globalised and digitised age, it is increasingly difficult to neatly split up profits made by multinationals into their different subsidiaries.
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