Legal Loopholes and Global Tax Arbitrage: Implications for Sustanable Development Growth and the Integrity of International Tax Systems

Introduction: This article aims to identify and categorize common hybrid entity arrangements exploited by multinational enterprises (MNEs) to reduce global tax liabilities. Grounded in international tax law and principles of tax equity, the study explores how legal mismatches and regulatory gaps enable aggressive tax planning. Methodology: Using a qualitative, descriptive approach, it examines prominent tax arbitrage strategies that arise from inconsistencies in legal classifications across jurisdictions. Results and Discussion: The analysis identifies five recurring structures: deduction/no inclusion (D/NI), double deduction of interest (DD), local borrowing combined with group loss shifting, reverse hybrids, and shipping-related tax benefits. These arrangements take advantage of legal loopholes and fragmented regulations, undermining the principles of fair tax competition. Conclusion: The findings underscore the pressing need for greater legal harmonization and stronger international cooperation to curb abusive tax practices. By shedding light on these opaque strategies, the research contributes to advancing sustainable development growth and emphasizing the importance of institutional integrity and equitable taxation in the global economy.