If for example, an MNC gets revenue from a client who is a citizen of a particular country, does that mean the MNC have to pay tax on that share of income to that particular country? Or can an MNC pick and choose which country they have operations in to pay taxes to?
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This is the subject of Transfer Pricing. Most countries in the world follow the guidelines from OECD that shall help allocate fair taxation to each country involved. Countries enter double tab treaties where they agree the specific way to split between them. And then multinational enterprises have to document how they did their allocation and prove that they were using arms length prices in their internal transactions.
Many countries take this seriously, mne’s can’t freely use tax havens anymore. Most mne’s actually just want to pay their fair bit of tax everywhere.
Special rules apply to the top 100 or so groups in the world. That’s where the real struggle is right now.
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