Javier García-Bernardo

University of Amsterdam

Mar 13th, 2017

Nature, origins and political consequences of corporate networks in modern economic life?

corporate networks


  • Companies




  • Shared directors
E.M. Heemskerk, F.W. Takes, J. Garcia-Bernardo and M.J. Huijzer ‘Where is the global corporate elite? A large-scale network study of local and nonlocal interlocking directorates‘, Sociologica 2016(2): 1-31, 2016. 
Mr. Jorge Paulo Lemann
- Heinz
- 3G Capital
- AB Inbev
- And another 70 positions


  • Companies


  • Ownership relationships

corporate networks

PARt 1: how to gain knowledge from complex structures?

``Uncovering Offshore Financial Centers: Conduits and Sinks in the Global Corporate Ownership Network''


Javier Garcia-Bernardo, Jan Fichtner, Frank Takes, Eelke Heemskerk


Offshore Financial Center (OFC): a jurisdiction (country) that attracts financial activities from abroad through low taxation and lenient regulation.

  • So, which countries are OFCs?
    • Definitions differ
    • Highly contested and politicized

  • FDI/GDP ratio approach: substantially more Foreign Direct Investment than expected based on GDP

  • Problematic because:
    • No exact investment flows, just dyadic relationships
    • OFC homogeneity assumption
      • Large countries hard to detect
      • No differentiation in roles

sinks and conduits

We look at which countries are used disproportionally in transnational ownership chains.


- 200 million companies

- 70 million ownership relationships

- 10 million transnational chains


sink-OFFshore financial centers

15 companies per capita


siNKS ARE geographically specialized



conduit-OFFshore financial centers

Larger flows towards sink-OFCs
Larger flows from sink-OFCs

decline of the netherlands

importance of the netherlands

  • 23% of all the value flowing to a sink-OFC flows through a Dutch Special Financial Institutions


  • Percentage of chains that go through the Netherlands and end in:
    • Luxembourg: 40%

    • Cyprus: 30%

    • Malta: 71%

    • Curaçao: 90%

    • Lichtenstein: 30%

PARt 2: why the netherlands?

Historical reasons:

  • Curaçao: Just before World War II, Dutch multinationals moved to CW to avoid the confiscation of assets.
  • Curaçao developed a prominent and flexible management industry.
  • Used to avoid withholding taxes (no longer applicable)
  • Effective tax rate in CW: 2.4 - 3%


During the 80s there was a push towards attracting corporations in the Netherlands.


importance of the netherlands



  • Logistic:
    • Located in the heart of Europe.
    • Outstanding infrastructure.
    • Highly educated and multilingual workforce.
  • Well-developed trust and management services.
    • Easy to start Special Purpose Entities (SFIs in NL)
  • Beneficial tax regime:
    • No withholding taxes for interest and royalties.
    • No real withholding tax for dividends.
      • Participation exemption.
      • Large number of tax treaties.
    • Advance Tax Rulings (ATR) and Advance Pricing Agreements (APA)
  • Investor protection
    • Large number of bilateral investment treaties
    • Advanced tax ruling system (increases certainty)


Orbis data, blanked


Orbis data, blanked

PART 3: the intermediaries

  • Asset management structures are complex for two reasons:
    • Mergers/acquisitions make them complex (for corporations)
    • Are created complex (for corporations/individuals):
      • To hedge against failures
      • To avoid regulations
      • To avoid taxation
  • They are created by intermediaries:
    • Law/trust firms (Appleby, Mossack Fonseca, Intertrust)
    • Accounting/auditor firms (The Big Four)
    • In the case of private investors there are usually several layers of intermediaries involved.
  • 25% of all Dutch entities are registered in 1% of all addresses; 41% in Luxembourg.

the intermediaries

Source: Internal presentation by the director of compliance (Woods)

  • - Terrorist financing offences: “We have a current case where we are sitting on about 400K that is definitely tainted and it is not easy to deal with.”
  • - Set up a trust and accepted money on his behalf “without question.”
  • Intermediaries typically advise clients to go offshore:
    • Reduces or eliminates taxes
    • Prevents courts control over assets
    • Privacy: Exchange of information only on request
    • "Business-friendly" legislation
  • A typical trick to increase privacy is to give up legal ownership of your assets (but maintain beneficial ownership)
    • Foundation/Stichting: Not private
    • Trust:
      • Originated from common law
      • Person (trustee) accepts assets from another person (settlor), for the benefit of a third person (beneficiary).
      • Private relationships, no legal entities, no record whatsoever.
      • "Flee" clauses: In case of specified "trigger" events, automatically transfers the trustees, assets, and governing law of the trust to another jurisdiction.

the intermediaries

  • Another trick to increase privacy is to use layering:
    • Layer a trust through four countries for the trustee, settler, beneficiary and governing law.
    • Add layers of shell companies within your structure in different countries.
      • Exchange of information is on request. Takes 2-3 months to answer.
      • The registry of corporations lie with the intermediaries.
      • An investigation involves asking the company for information about one of their clients.
  • How to prevent this?
    • More transparency (EU, OECD)
    • Using a big data approach, combining databases.

the intermediaries


1. Offshore financial centers can be divided into sinks and conduits

  • Sinks are:
    • EU: Luxembourg, Malta, Cyprus, Jersey, Gibraltar
    • Other former colonies/territories of the United Kingdom
  • Conduits are:
    • Netherlands, Ireland, Switzerland, Singapore, United Kingdom

2. The Netherlands is the largest conduit in offshore finance:

  • Long history of offshore asset management
  • Great infrastructure, services and taxes
  • It is declining: more strict regulations in the last decade

3. Asset management structures are becoming more complex. We need new techniques to be able to detect tax fraud.







This presentation: slides.com/jgarciab/bd

Belastingdienst presentatie March 2018

By Javier GB

Belastingdienst presentatie March 2018

sink and conduits in Corporate Structures

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