After the Apple controversy came to public view many of the methods multi-national companies use to evade taxes legally began to be scrutinized. Profit shifting is one of those methods. Apple has said it does not shift profits from the U.S. to other countries, but stated it did not bring the profits it made in other countries to the U.S. because of the high corporate tax rate in the U.S.
Multi-national companies often use complex tax strategies to either shift their profits to jurisdictions with lower tax rates or keep their profits from entering the U.S. Closing loopholes in the tax code that allow companies to evade taxes is currently being debated as a way considered to curb tax evasion.
The complexity of the tax code is another factor that leads to the exploitation of tax loopholes. Taxpayers also face problems in preparing their taxes because it is hard for them to comprehend the numerous tax laws.
The methods to make the tax code simpler and more effective include shifting the tax system from income based to expenditure based. Congress proposed the Fair Tax, a tax system that is based on expenditures instead of income, but there can be many difficulties in its implementation.
The government has taken many steps to limit tax evasion, including its efforts under FATCA, but blocking loopholes in the tax code is an important and necessary step that will significantly decrease tax evasion by multi-national companies.