Well they would have to pay: - Import tax on all the products(IP, patenets, licenses etc) licensed/purchased from BMW Panama - Sales tax? So the US would get

Well they would have to pay: - Import tax on all the products(IP, patenets, licenses etc) licensed/purchased from BMW Panama - Sales tax? So the US would get more customs and sales tax and less profit tax. Nevertheless the scheme you mentioned is meant to lower the tax paid(i.e. the import tax may be lower than the profit tax) so I fully agree that something should be done. I guess only solution would be the term "tax avoidance" to be defined, put into the trade agreements(i.e. WTO, EU etc) and governments allowed fine the companies employing such practices just like the "state aid". The issue in EU is way worse because there is no import or sales tax so using your hypothetical story BMW GmbH pays only the profit tax in Panama. Related: In Europe the operating company takes loans at high interest rates from its shell in Luxembourgh to siphon off the profits.