How do MNCs benefit from using tax havens?

What will be an ideal response?

The ability of multinational corporations to lower their tax burdens by the strategic use of transfer prices is facilitated by the existence of tax havens, countries that impose little or no corporate income taxes. For a relatively small fee, an MNC may set up a wholly owned subsidiary in a tax haven. By manipulating payments such as transfer prices, dividends, interest, royalties, and capital gains between its various subsidiaries, an MNC may divert income from subsidiaries in high-tax countries to the subsidiary operating in the tax haven. By booking its profits in the tax haven subsidiary, the MNC escapes the clutches of revenue agents in other countries.