It presumably transfers money to the parent in ways other than dividends, e.g. paying for licenses or inventory.

The problem is the same as it has always been -- profit is easy to move around, so it ends up in the jurisdiction with the lowest taxes.

Then people get upset that they have billions in sales and are paying minimal taxes, but whose fault is that really? Nobody is preventing you from collecting tax on sales. If you instead only collect tax on profits, and the entity which is actually in your jurisdiction has minimal profits, blame yourself for choosing that tax structure, not the company for responding to it.

It's simple enough for a legislature to replace corporate income tax with VAT if they really want to tax based on sales. And if they don't then what are they complaining about? Would the UK really be in a different position if the US had a lower corporate tax rate and Apple reported its profits there instead?