Almost 40% of corporate investments channeled away from authorities and into tax havens travel through the UK or the Netherlands, according to a study of the ownership structures of 98m firms. The Netherlands was a conduit for 23% of corporate investments that ended in a tax haven, while the UK accounted for 14%, ahead of Switzerland (6%), Singapore (2%) and Ireland (1%).
The researchers at University of Amsterdam used a "novel data-driven approach" for identifying Offshore Financial Centers (OFCs) based on the global corporate ownership network, in which over 98 million firms (nodes) are connected through 71 million ownership relations. This data uniquely allows identifying both sink-OFCs and conduit-OFCs. "Sink-OFCs attract and retain foreign capital while conduit-OFCs are attractive intermediate destinations in the routing of international investments and enable the transfer of capital without taxation," the researchers informed.
For each available company, the researchers extracted its operating revenue, country, city, sector, global ultimate owner (the parent firm who owns at least 50% of the company directly or indirectly and is not itself owned by any other firm) and all ownership relationships, with the direct and total ownership percentage. The resulting dataset contains 71,201,304 distinct ownership relationships between 98,255,206 companies.
The researchers identified 24 sink-OFCs and conclude that a small set of five countries – the Netherlands, the United Kingdom, Ireland, Singapore and Switzerland – canalize the majority of corporate offshore investment as conduit-OFCs.
"Each conduit jurisdiction is specialized in a geographical area and there is significant specialization based on industrial sectors. Against the idea of OFCs as exotic small islands that cannot be regulated, we show that many sink and conduit-OFCs are highly developed countries," the researchers informed.
TPA Global has developed a practical roadmap of 6 steps meant to guide CFOs in their Journey of rising above troubles to reach a situation of full control. These steps are presented in a series of short video clips (3-5 minutes):
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