illicit financial flowS and micro data

who is the largest investor in germany?

who is the largest investor in brazil?

who is the largest investor in south africa?

why?

Spoiler: Tax avoidance

professionals

corporate entities

state

PARt 1: The corporations

corporate ownership is complex

Garcia-Bernardo, J., Fichtner, J., Takes, F. W., & Heemskerk, E. M. (2017). Uncovering offshore financial centers: Conduits and sinks in the global corporate ownership network. Scientific Reports, 7(1), 1-10.

Work with Valeria Secchini (PhD candidate at COPTAX, Charles University)

modeling corporate structures with higher-order dependencies

Work with Valeria Secchini (PhD candidate at COPTAX, Charles University)

modeling corporate structures with higher-order dependencies

Xu, Jian, Thanuka L. Wickramarathne, and Nitesh V. Chawla. "Representing higher-order dependencies in networks." Science advances 2.5 (2016): e1600028.

Kullback-Leibler divergence

Problem: overfitting

(high number of false positives)

 

On realistic synthetic data:

Precision: 10%

Sensitivity: 80%

 

Our solution: Train/Validation approach

Find in the training, keep if it holds in validation

 

Jensen–Shannon divergence

Depends on frequency of each higher-order dependency, and the variability in train/test

 

 

 

 

On realistic synthetic data:

Precision: 70%

Sensitivity: 50%

<
-

Open questions:

 

How to derive the thresholds (δ) theoretically?

 

How to handle heterogeneity? Higher-order dependencies may be "owner dependent" (the first node in the chain)

 

How to handle time series? (e.g. detect changes in structures, measure effect of policy)

 

(lots on results: community, ranking, simulation)

 

 

 

 

Results:

Applied to multinational corporations

 

70 patterns, 75% containing a tax haven

p.

p.

p.

PARt 2: the professionals

  • Corporate structures are created by tax professionals:
    • Set up the entity
    • Provide directors
    • Manage the accounts
  • In the Netherlands: Trust Industry (trustkantoren)
    • 94% of the services are provided to foreign companies
    • 250,592 entities in 100 addresses
  • Providing trust services requires a license
    • But it is expensive + compliance

8150 companies

9.3/window

facilitators are key

 

How many illegal trust service providers are in the netherlands?

detect them based on their network

Garcia-Bernardo, Javier, Joost Witteman, and Marilou Vlaanderen. "Uncovering the size of the illegal corporate service provider industry in the Netherlands: a network approach." EPJ Data Science 11.1 (2022): 23.

Strategy:

  • Build network features
  • Find similar directors to those from a licensed trust
  • Manually annotate a sample
  • Robustness test

 

Open questions:

 

Better way to find illegal directors? (maybe GNNs)

 

Motifs mining: What are some motifs linked to providing trust services

 

 

(lots on applications: e.g., suspicious transactions)

 

 

 

 

 

Results:

 

Illegal trust service providers:

  • 31-51% of total number of trust service providers
  • 19-27% of all companies managed

PARt 3: The state

what type of country lose the most from tax avoidance?

Garcia-Bernardo, Javier, and Petr Janský. "Profit shifting of multinational corporations worldwide." arXiv preprint arXiv:2201.08444 (2022).

Cost = (Profits shifted out - Profits shifted in) * Tax rate / GDP

Garcia-Bernardo, J., Haberly, D., Janský, P., Palanský, M., & Secchini, V. (2022). The indirect costs of corporate tax avoidance exacerbate cross-country inequality (No. 2022/33). WIDER Working Paper.
Garcia-Bernardo, J., Haberly, D., Janský, P., Palanský, M., & Secchini, V. (2022). The indirect costs of corporate tax avoidance exacerbate cross-country inequality (No. 2022/33). WIDER Working Paper.
Garcia-Bernardo, J., Haberly, D., Janský, P., Palanský, M., & Secchini, V. (2022). The indirect costs of corporate tax avoidance exacerbate cross-country inequality (No. 2022/33). WIDER Working Paper.
Garcia-Bernardo, J., Haberly, D., Janský, P., Palanský, M., & Secchini, V. (2022). The indirect costs of corporate tax avoidance exacerbate cross-country inequality (No. 2022/33). WIDER Working Paper.
Garcia-Bernardo, J., Haberly, D., Janský, P., Palanský, M., & Secchini, V. (2022). The indirect costs of corporate tax avoidance exacerbate cross-country inequality (No. 2022/33). WIDER Working Paper.

developing countries lose more

Open questions:

How to implement policy interventions in the model?

How to calibrate the model to find time trends?

 

 

 

 summary

  • Wealth inequality is rising
  • Tax avoidance is key
  • Complex corporate structures are used for it

 

 

 

  • Network science tools help us:
    • Understand how they organize (higher order dependencies)
    • Estimate which countries gain/lose
    • Detect facilitators

 

 

 

 

 

 

Image: R-package signet

Covid spread on family & school networks

with RIVM, ministry of health, Christine Hedde-von Westernhagen


Experiments on information spread in networks

 

with: Zohar Neu, Mathew Hardy, Tom Griffiths, Aleksandra AloriĆ, 
P.M. Krafft, Andrea Santoro, Allison Morgan
Detecting organized groups in social networks
Polarization in signed networks

with: Sofia Chelmi, Elena Candellone, Erik-Jan van Kesteren, Shazia Babul

 summary

  • Wealth inequality is rising
  • Tax avoidance is key
  • Complex corporate structures are used for it

 

 

 

  • Network science tools help us:
    • Understand how they organize (higher order dependencies)
    • Estimate which countries gain/lose
    • Detect facilitators

 

 

 

 

 

 

Javier García-Bernardo

javier@duck.com

Made with Slides.com