002 - Profit repatriation and tax avoidance

Geographic Knowledge and Understanding

New and emerging threats to the political and economic sovereignty of states:

- Profit repatriation and tax avoidance by TNCs and wealthy individuals.

Concepts

The processes involved in profit repatriation and tax avoidance by TNCs and wealthy individuals lead to outcomes that have the power to impact the sovereignty of states.

Key Terminology

            • Profit Repatriation
            • Tax Avoidance
            • Offshore Company
            • Offshore Tax Haven
            • Corporation Tax

Define the key terms above by using the 'Useful Links' below:

Useful Links

Activity One - Discussion

We have all heard of companies having their head quarters in tax havens or having them built in countries that do not charge high corporation tax but why is this an issue?


      1. Watch the YouTube clip below and write down how tax havens could potentially be a threat to the political and economic sovereignty of states?
      2. Spend five minutes searching the web for articles on companies that avoid paying tax or repatriating their profits. Write the name of the company and the country that is complaining.
      3. What is the pattern of countries that are demanding TNCs repatriate their profit to the country of origin.

Activity Two - Detailed Examples

Now you have an idea why this is an important issue for countries and how it can impact their political and economic sovereignty we are going to focus on two key examples; Apple and Amazon. After all the majority of you have ordered something from Amazon before and there are a lot of macs being used in the school. We also use the USA as one of our focus countries, but let's listen to President Trump to see what he thinks are the benefits of repatriating profits.


      1. Make notes on what Trump has to say.
      2. Explain how Apple avoids paying tax.
      3. Why does Apple plan to repatriate its profits? What do they hope to gain?
      4. How did Amazon manage to use Luxembourg selective tax to their benefit?
      5. Why are Amazon having to pay the EU in back taxes?

Activity Three - Impact

We are now going to focus on the impact that capital flight and tax avoidance have on Low Income Countries.


      1. Read the two articles in the 'Useful Resources' box and make notes on how Low Income Countries are impacted by TNCs who avoid paying their tax and mis-represent the value of the goods they make.

Activity Four - Regaining Control

We have already heard how the USA are trying to regain power over the tax that their TNCs are paying but what is the UK doing? Using the link below in the 'Useful Resources' box view the infographic and explain what the British are doing to regain the power of unpaid taxes.

Exam Style Question

Evaluate the threat posed to the political and economic sovereignty of states by profit repatriation and tax avoidance by TNCs. [16 marks]

This lesson was development in collaboration with Richard Allaway from geographyalltheway. For more resources please visit www.geographyalltheway.com