Javier García-Bernardo
The University of Amsterdam
Sept 29th, 2017
Javier Garcia-Bernardo, Jan Fichtner, Frank Takes, Eelke Heemskerk
``Uncovering Offshore Financial Centers: Conduits and Sinks in the Global Corporate Ownership Network''
https://www.nature.com/articles/s41598-017-06322-9
We look at which countries are used disproportionally in transnational ownership chains.
Blue: (Former) Colony/Territory of the UK
aka The empire strikes back
Paradisacal beach in Luxembourg
sink
conduit
some country
18% of all flow to sinks
23% of all flow to sinks
`The erosion of sovereignty and race to the bottom'
Data: Yearly snapshots (2008-2017) for dividend, royalties and interest withholding taxes.
Agreements between two countries, in which they clarify who has the right to tax what in order to avoid double taxation.
Corporations move profits to conduits and sinks using tax treaties.
Theory:
Theory:
However:
- Tax treaty US-LU: Royalties should pay taxation in US, and McDonald's needs to show the receipt.
- Loophole: US law states that branches should pay tax in Luxembourg.
- Lux tax ruling: McDonald's does not need to show the receipt.
If treaty shopping is real:
- MNEs move if indirect routes are cheap
- Small countries have a first-mover advantage
- Sovereignty eroded: Other countries are forced to reduce taxes.
Method:
- Test if investment after a tax treaty is associated with a decrease in investment in neighbor countries.
corpnet.uva.nl
This presentation: slides.com/jgarciab/eusn
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