Multinational companies have continually engaged in the movement of head office address due to the variations in tax regulations of countries. Various laws have tried tackling the problem of transfer pricing but the variations in taxing regulation will always allow for loopholes where these Multinationals can build on and save huge taxing cuts which in turn maximises shareholder returns. Companies like Tesco who engage in offshoring have recorded huge savings of up to £125 million. This could therefore serve as a competitive advantage for Tesco thereby reducing overall cost and improving profits which ultimately maximises shareholder wealth. However, competition strategies makes it inevitable for competitors not to follow in footsteps of its competitors otherwise they will be outplayed causing bankruptcy e.t.c.
Issues of offshoring is no news to the governments of the developed economies but various reasons deters them from pursuing laws to prevent such acts. Personally, the ability of firms to save cost by taking advantage of loopholes in the taxing system seems erroneous but its advantage to companies is limitless therefore, countries with higher tax brackets such as UK and US will highly benefit from reduced tax as not only will investor remain in their countries but they will also attract foreign investors.
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