BEYOND AVOIDANCE: THE MICROSOFT–PUERTO RICO CASE AND THE CHALLENGES OF INTERNATIONAL TAX REGULATION

Over the last few years, the tax planning strategies of multinational corporations have been at the centre of attention for tax authorities and the press. The LuxLeaks and Panama Papers cases have revealed controversial tax avoidance practices, triggering robust regulatory action at the national and international level. According to the OECD, these practices reduce the effective tax rate paid by large multinationals by an average of 4-8.5 percentage points, compared to similar domestic companies. The case of Microsoft in Puerto Rico serves as an example to understand the complexity of regulating the international tax regime, since it highlights the role of tax havens as destinations for profits to gain tax benefits and illustrates the dynamics of the main profit shifting strategies that exploit the asymmetries and loopholes created by the misalignment of the different tax systems. This paper starts from the idea of studying the initiatives proposed by the OECD and the European Union, introduced to combat base erosion and profit shifting, in order to understand their mechanisms and the difficulties that hinder their implementation. The thesis presents a fragile international equilibrium in which the large number of stakeholders involved, diverging interests, the dynamics of continuous mutual adaptation between multinationals and regulators, and rapid technological progress make the harmonisation process long and fragmented. It concludes that an equitable and sustainable international tax system in the long term requires even stronger and cohesive involvement of all its stakeholders.