LoopholeKiln · The Ledger

Tax-avoidance glossary: 31 terms in plain English

Every term a large company's tax advisers use, defined in plain English, with a one-line example and what it means for a small business. These are the mechanisms behind a single fact: across the UK, US, Canada, Australia and India, a small firm pays close to the headline corporate tax rate while many of the largest multinationals pay a fraction of it. The words below are how that gap is built. None of them describe anything illegal on their own. That is the point. The system is legal; the question is who it is built for.

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Figures current as of·Corrections

Around a third of the largest firms in the world face an effective tax rate below the 15% global minimum (World Bank / IFS, 13-country dataset, 2023). Close to 40% of all multinational profit, about US$1 trillion a year, is shifted into tax havens (Tørsløv, Wier and Zucman, 2019 figures; missingprofits.world). The glossary explains how.

Index

  • Transfer pricing
  • Arm's-length principle
  • Base erosion
  • Profit shifting
  • BEPS
  • Effective tax rate vs headline rate
  • Tax haven
  • Conduit jurisdiction
  • Double Irish
  • Patent box
  • Thin capitalisation
  • CFC rules
  • Treaty shopping
  • Hybrid mismatch
  • Diverted Profits Tax
  • GILTI / NCTI
  • BEAT
  • FDII / FDDEI
  • MAAL
  • GAAR
  • Equalisation levy
  • Digital Services Tax
  • Pillar One
  • Pillar Two
  • GloBE
  • QDMTT
  • Unitary taxation
  • Country-by-country reporting
  • Tax avoidance vs evasion vs planning
  • The tax gap
  • Marginal relief