Tax planning by multinational enterprises operating in Norway

Abstract

This master’s thesis examines whether multinational enterprises (MNEs) headquartered in Norway are at a disadvantage compared to MNEs headquartered outside of Norway, due to differences in adaption to tax regulatory frameworks. The focus is on how strategic company ownership structures might affect profit shifting capabilities, thereby potentially skewing competitive advantage towards internationally headquartered enterprises. We analyze the annual reports of Microsoft Norge AS, a subsidiary of a foreign parent company Microsoft Corp, and Visma Software AS, a subsidiary of Visma AS, a domestic parent company headquartered in Norway, in a comparative case study spanning 2008–2022. This study shows that to reduce its tax burden, Microsoft uses sophisticated techniques including transfer pricing for profit shifting and taking advantage of constitutional gaps between various tax jurisdictions. Such Strategies allow MNEs such as Microsoft Corp to report higher profits in low-tax regions, while reducing their overall tax liabilities and possibly gaining a competitive edge over their local competitors in countries like Norway.Despite the international effort of the Organization for Economic Co-operation and Development (OECD) to tackle profit shifting and tax base erosion, the enforcement is patchy at best and provides the MNEs with certain loopholes. This thesis emphasizes the need for a more robust and cohesive international regulatory framework that will ensure fair competition and safeguard national tax revenues. Our analysis illustrate that Microsoft Norge AS engages in profit shifting behaviors that potentially reduce the corporate tax base in Norway, leading to an increased competitive advantage globally and in Norway. In contrast Visma Software AS does not exhibit the same behavior. The thesis concludes that strategic ownership structures and international headquarters provide certain MNEs with an unfair competitive advantage through tax optimization, underscoring the necessity for a less complex and more aligned international regulatory tax framework.