The larger point, also made by Humbug and BruceMcF below, is that "transfer pricing" allows companies to declare profits where they will be taxed least.  Thus the Irish Microsoft Research unit could charge other parts of Microsoft huge fees for research done in Ireland - thus reducing tax exposure in high tax environments, and increasing it in low tax environments.

I have do doubt that, long term, a global system of corporate taxation must evolve - to avoid creating tax shelters like the Cayman's and to avoid providing incentives to distort revenues as above. The first step must be to create common accountancy standards for the taxable base to be calculated, and the next step would then be to gradually harmonise the tax rates.  

Provided peripheral/underdeveloped countries are provided some means of playing catchup or creating a more level playing field, I have to problem with this being done.  However it would require a huge Brettoon Woods like global agreement, with the threat of exclusion from the global trading system for all countries which fail to comply.

This was unthinkable under Bush, and probably under Obama - because it will be presented as socialism on a world scale.  Global Capitalism will fight it tooth and nail.  I don't expect to see it in my lifetime, but you never know.  Obama may surprise us all.

notes from no w here