Offshore finance and corporate tax avoidance
Javier García-Bernardo
Location of profits
Location of employees
the Netherlands, Switzerland, Luxembourg, Ireland and Singapore
+5€ (coffee)
-1€ (brand)
-4€ (costs)
Starbucks Spain
Starbucks NL
EBT: 0€
EBT: 1€
+1€ (brand)
+5€ (coffee)
-4€ (costs)
Cafe Pepe
EBT: 1€
Tax: 0€
Profit: 0€
Tax: 0.07€
Profit: 0.93€
Tax: 0.25€
Profit: 0.75€
1. Which jurisdictions are OFCs?
3. to which extent do OFCs affect corporate tax rates?
2. how are OFCs used by MNCs?
Firms shift ~$800 billion to OFCs
Four perspectives:
- Corporate ownership networks
- Fragmentation of the firm
- Location of tax professionals
- Location of profits
1&2
Profit Centers
Mainly UK colonies
No taxation
Secrecy
Avoid legislation
1&2
Coordination Centers
Developed countries
Low tax on financial profits
Conduit to profit centers
Regional management
High-value adding operations
1&2
Increased profit shifting: <30%
Decrease in tax rates: >70%
3. to which extent to OFCs affect tax rates?
Corporate tax rates are decreasing
Why is this importanT?
Revenue losses
Economic efficiency AND EQUITY
corporate power
inequality
Policy making
Javier García-Bernardo
@javiergb_com
javiergb.com
garcia@uva.nl
jgarciab
