Analyzing Global Tax Evasion: Mechanism Design Approach and Core Strategies of Tax Avoidance

Abstract

In recent years, tax avoidance has gained widespread attention from the public, the media, and governments, especially in poorer nations where its negative effects are more pronounced. Governments are giving the battle against tax avoidance practices priority to address this problem. Transfer pricing, which involves moving profits from high-tax jurisdictions to low-tax jurisdictions, and the use of tax havens, which are nations or territories that offer low tax rates and other tax incentives to draw in foreign investment, are two examples of tax avoidance strategies. The use of tax law loopholes, claiming excessive deductions or exemptions, and proactive tax planning are additional strategies. Using a mechanism design approach that considers people's probabilistic views about the extent of public good provision and the structure of the tax system, this study will analyze tax evasion in the global setting. Additionally, this article will go into the idea of tax evasion as well as the core ideas of tax avoidance strategies, such as transfer pricing and the usage of tax havens.