Click the star to add/remove an item to/from your individual schedule.
You need to be logged in to avail of this functionality.
Log in
- Convenors:
-
Daniel Haberly
(University of Sussex)
Alex Cobham (Tax Justice Network)
Send message to Convenors
- Formats:
- Papers
- Stream:
- Opening up the Market
- Location:
- Library Presentation Room
- Sessions:
- Friday 21 June, -
Time zone: Europe/London
Short Abstract:
The impacts of tax and secrecy 'haven' use are felt most acutely in lower-income countries. Papers in this panel present research that sheds new light on the patterns, drivers, and impacts of haven use, as well as the effectiveness of ongoing and prospective international reform efforts.
Long Abstract:
Growing attention has become focused on the uses and abuses of tax and secrecy 'havens' by corporations and individuals. The impacts of this use are global; however, they are felt most acutely in lower-income countries, where they are associated with issues including the laundering and storage of the proceeds of corruption and other illicit activity, the erosion of state fiscal capacity, and the exacerbation of financial instability and balance of payments problems. There are increasingly concerted haven-targeted reform efforts by both international bodies (e.g. OECD and EU) and national governments. However, critical questions remain regarding the patterns, drivers and impacts of haven use, as well as the effectiveness of specific reforms. Indeed, for lower-income countries in particular, poor data quality often makes it challenging to assess even basic issues such as the overall scale of haven use. Papers in this panel will present research that sheds new light on these questions from an academic and policy perspective, with a focus on examining the following in the context of lower-income economies: 1) Who makes use of haven jurisdictions (e.g. foreign multinationals vs local firms and individuals) where and on what scale? 2) What are the drivers of haven use in various contexts? 3) What are the impacts of haven use on lower-income countries? 4) How effective are national and international interventions at curtailing either the use of haven jurisdictions, or its negative impacts?, and 5) What should be done to supplement or enhance the effectiveness of these interventions?
Accepted papers:
Session 1 Friday 21 June, 2019, -Alice Lépissier (UC Santa Barbara) Alex Cobham (Tax Justice Network)
Paper short abstract:
Which developing countries are most exposed to illicit financial flows (IFF)? We provide a new data-set of risk measures for IFF in trade, direct investment, portfolio investment, and banking positions that will facilitate comparative analysis of IFF risks facing individual countries.
Paper long abstract:
'Illicit financial flows' (IFF) is an umbrella term for a broad group of harmful, cross-border economic and financial transactions, comprising two main types: illegal capital IFF (those based on the theft of state assets and the proceeds of crime), and legal capital IFF (those based on tax evasion and avoidance, or regulatory abuses). Most research to date has focused on estimates of scale and harmful impacts. But scale estimates do not typically provide the granularity to support policy prioritisation at the national or regional level. A complementary or alternative approach to seeking indicators of scale can be found in a risk-based approach. This has the potential to offer both a more granular analysis, and also to go beyond overall monitoring and accountability, to support policy prioritization at the national level. The central idea behind this approach is this: that because illicit financial flows are, by definition, hidden, the likelihood of an illicit component will be increasing in the degree of financial opacity in any given transaction. Combining measures of the financial opacity offered by individual jurisdictions with bilateral data on trade, investment and banking relationships, we present a new dataset allowing comparative analysis of IFF risks facing individual countries. We show that there exists large variation in the range of vulnerabilities facing different countries and regions, with clear implications for the most important areas for policy response at each level.
Tereza Palanská (Charles University)
Paper short abstract:
We analyze how multinationals have reacted to recent changes to legislation related to transfer pricing with a specific focus on developing countries.
Paper long abstract:
In recent years, transfer pricing regulations have seen uneven progress across countries, especially the developing ones. In this paper, we analyze the changes in the MNEs' behavior following major changes to legislation that regulates the way transfer prices are set between related companies based in tax havens and in other countries. We build on and extend the approach of Marques and Pinho (2016) to quantify the strictness of transfer pricing regulations in tax havens as well as non-havens and hypothesize that MNEs react to changes in these regulations by adjusting the prices for intra-firm traded goods and services accordingly. Specifically, we argue that changes in the relative strictness of transfer pricing regulations can explain a part of the differential in the reported profits of affiliates in low- and high-tax jurisdictions.
Saila Stausholm (Copenhagen Business School) Petr Janský (Charles University) Marek Sedivy (Charles University)
Paper short abstract:
We analyse country by country data from three different sources on the extractives industry and find that the current reporting standards, while having high compliance, has such a narrow design that it is non-operational when it comes to present issues of tax avoidance.
Paper long abstract:
Following recent increased attention towards the tax payments of multinationals, OECD and the EU has started implementing Country By Country Reporting (CBCR) standards for the largest firms with global operations in certain industries. The use of CBCR provides transparency that enables governments as well as civil society to compare the tax payments and profitability to the value adding activities in each country, enabling analysis of whether there are any misallocations of profits that can indicate tax avoidance. However, the use of CBCR in the extractives industry is limited for this purpose. We evaluate the available data on the extractives industry and find that while compliance in reporting is high, it is impossible from the data to determine whether compliance in tax payment is high. We use three data sets to focus on the same payments: Resourcedata.org, Resourcecontracts.org and Orbis. We find that while all three sources of information do increase transparency, they are not easily combined, and real transparency is therefore limited. The reporting standard has not been designed for the purposes of ensuring against transfer mis-pricing and similar tax avoidance strategies. We therefore argue that a reconsideration of the requirements for publishing CBRC data in the extractives industries is needed, and should cover more aspects such as the scope of activities as well as the fiscal rules agreed on in the contract. This would enable civil society to use the data to hold governments accountable on receipts from multinational companies for exploiting natural resources.
Daniel Haberly (University of Sussex)
Paper short abstract:
This paper presents findings for developing and transition economies from the "Atlas of Offshore FDI," which systematically quantifies and maps the structure of global offshore shell company investment. Offshore "round-trip" FDI is shown to result in particularly large distortions in official data.
Paper long abstract:
In recent years, there has been greatly increased academic and public interest in the use and abuse of offshore shell companies, which have been linked to a range of issues from corporate tax avoidance to illicit financial flows. The scale of shell company use is enormous; far from a peripheral distortion of the map of global foreign direct investment (FDI), these networks of "paper" entities in many respects are the map of FDI, accounting for as much as half of the world's entire FDI stock, and well over half of the FDI of many developing and transition economies. The scale of this issue not only poses problems in relation to issues directly associated with offshore / tax haven use, but also, even more fundamentally, prevents us from seeing the true shape of the global economy, above all in the global south. This paper presents key findings for major developing and transition economies from the "Atlas of Offshore FDI" project, which employs a novel micro-macro data triangulation methodology to systematically map and quantify the true beneficial owning nationality of FDI stocks in countries held via offshore holding structures, which have been hitherto classified on only a proximate origin basis in official data. Significant findings include the most systematic estimation to date of offshore "round-trip" FDI in the BRIC economies, which is shown to result in a substantial exaggeration of the value of truly "foreign" investment in these countries in existing official statistics.