This paper traces the history of international corporate taxation, discusses how transnational corporations (TNCs), through their tax advisers, have helped to shape the system, and suggests that this is important in understanding the development of TNCs. It argues that a key competitive advantage of TNCs is their ability to exploit differences in corporate tax rules, as a form of regulatory arbitrage, which is facilitated by the inadequate coordination of those rules. It focuses on the divergence between the understanding in business, economics and international studies that TNCs are unitary firms and the principle which has increasingly hardened in international tax rules, especially on transfer pricing, that the various affiliates of TNCs in different countries should be treated as if they were independent entities dealing with each other at arm's length. It argues that this facilitates tax avoidance, which is one of the strategies of the exploitation of regulatory differences, or regulatory arbitrage, which has contributed to the growth and oligopolistic dominance of large TNCs. While claiming that they merely obey the laws of each country where they do business, TNCs have taken advantage of their global reach to mould laws and normative practices, and develop structures taking maximum advantage of the loose coordination of global governance regimes.