TAX INVERSION

This is a situation of tax structure. This takes place when a firm bases its headquarters in a low tax country while keeps its material operations in the high tax countries (generally their country of origin). This way, firms cut their tax payment liabilities. This is legal and is a method of tax avoidance. Multinational corporations (MNCs) keep doing this—several MNCs of the US-origin shifted their headquarters to the UK, during 1970s and 1980s. The countries in the world which have very low tax regime for corporations have emerged as a very attractive loactions for the headquarters of big

corporations. Bermuda, Virgin Islands, etc. are such countries (popularly known as the ‘tax havens’).