New & Emerging Threats (HL IB Geography)

Revision Note

Profit Repatriation & Tax Avoidance

  • A state is a nation, country or territory that has an organised political community by one government and over which no other state has any power or sovereignty—in other words, a self-governing nation

  • Profit repatriation is where the profits earned from a foreign operation are returned to the company's home country

  • When profits are constantly transferred and not reinvested in the country, the local economy loses out on potential growth opportunities, such as

    • Infrastructure development

    • Job opportunities

  • Economic dependency can occur as nations become financially dependent on foreign companies, which limits their economic sovereignty and policy-making

  • The outflow of money can influence currency demand and supply , which can lead to the devaluation of currency, making imports more expensive for the host country

Tax avoidance

  • Tax avoidance uses legal loopholes to reduce a company's or personal tax bill

Impacts of Tax Avoidance on State Sovereignty

Impact

Effect

Loss of state revenue

TNCs make large profits in other countries, but pay very little tax, leaving the government with less money for domestic services such as education and health

Economic inequality

As TNCs and wealthy individuals pay less tax, the average citizen often has a higher tax responsibility, leading to economic disparities

Policy challenges

Governments need to constantly update tax laws to close loopholes, leading to complex and extensive regulations

Eroded public trust

The idea that the wealthy or big corporations evade taxes, diminishes public trust in governmental and financial systems

Disruptive Technologies

  • Advancements in technology can drive progress but also challenges state sovereignty, particularly when regulations are unable to keep pace

  • The rise of drones, both commercial and leisure, has raised issues in multiple sectors

Impact of Drones on State Sovereignty

Sector

Impact

National Security

Border security is challenged as drones can easily cross over, bringing drugs or conducting illicit surveillance

Drones can be weaponised, avoid national security measures and used in terrorist attacks

Privacy

Drones equipped with cameras can infringe on personal privacy, leading to potential legal and ethical issues

Airspace

With the number of drones increasing, airspace management to prevent air collisions becomes vital

3D printing

  • This technology has huge potential but also carries risks

  • There is the potential for 3D printers to produce firearms or other weapons

    • The ease of production bypasses state regulations, leading to illegal weapons being circulated around the globe, particularly as many of the components are not identified on X-ray in airports

  • 3D printing can replicate patented products, leading to intellectual property infringements, and challenging states to enforce protections

  • As 3D printing becomes more accessible, traditional manufacturing industries may suffer, leading to economic shifts and potential job losses

Cyber Threats

  • Cyber threats directly challenge state security through:

    • Some nations might employ state-sponsored attacks by using hackers to disrupt another country's infrastructure or steal sensitive information, leading to geopolitical tensions

    • Targeting financial institutions can cause huge financial losses and undermine economic stability

    • Vital infrastructure, such as energy grids, can be targeted, potentially crippling a nation

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