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77-413: Conduit OFC and sink OFC is an empirical quantitative method of classifying corporate tax havens , offshore financial centres (OFCs) and tax havens . Traditional methods for identifying tax havens analyse tax and legal structures for base erosion and profit shifting (BEPS) tools. However, this approach follows a purely quantitative approach, ignoring any taxation or legal concepts, to instead follow

154-638: A big data analysis of the ownership chains of 98 million global companies. The technique gives both a method of classification and a method of understanding the relative scale – but not absolute scale – of havens/OFCs. The results were published by the University of Amsterdam 's CORPNET Group in 2017, and identified two classifications: Our findings debunk the myth of tax havens as exotic far-flung islands that are difficult, if not impossible, to regulate. Many offshore financial centers are highly developed countries with strong regulatory environments. In 2017,

231-408: A "captured" by their financial services industry. The legal and tax structuring undertaken by conduit OFCs is considered beyond the trust–structuring type work of the traditional tax haven " offshore magic circle " law firms. Conduit OFCs need structures that can integrate with bilateral tax treaties involving G20 countries, as well as meeting U.S. GAAP / SEC Regulations that U.S. multinationals, one of

308-745: A "conduit", to route the funds to more explicitly zero-tax, and more secretive traditional tax havens. Google does this with the Netherlands to route EU funds untaxed to Bermuda (i.e. dutch sandwich to avoid EU withholding taxes ), and Russian banks do this with Ireland to avoid international sanctions and access capital markets (i.e. Irish Section 110 SPVs ). A study published in Nature in 2017 (see Conduit and Sink OFCs ), highlighted an emerging gap between corporation tax haven specialists (called Conduit OFCs), and more traditional tax havens (called Sink OFCs). It also highlighted that each Conduit OFC

385-439: A "substantive presence", equating to an "employment tax" of approximately 2–3% of profits shielded and if these are real jobs, the tax is mitigated. In corporate tax haven lists, CORPNET's "Orbis connections" , ranks the Netherlands, U.K., Switzerland, Ireland, and Singapore as the world's key corporate tax havens, while Zucman's "quantum of funds" ranks Ireland as the largest global corporate tax haven. In proxy tests, Ireland

462-480: A PPP basis is arguably more useful when comparing generalized differences in living standards between economies because PPP takes into account the relative cost of living and the inflation rates of the countries, rather than using only exchange rates , which may distort the real differences in income. This is why GDP (PPP) per capita is often considered one of the indicators of a country's standard of living, although this can be problematic because GDP per capita

539-404: A county with oil & gas resources and still ranking in the top 10 of world GDP-per-capita league tables, is considered a strong proxy sign of a corporate (or traditional) tax haven. GDP-per-capita tables with identification of haven types are here § GDP-per-capita tax haven proxy . Ireland's distorted economic statistics, post leprechaun economics and the introduction of modified GNI ,

616-463: A handful of large multinational corporations [during leprechaun economics ] have now become so large as to make a mockery of conventional uses of Irish GDP. List of countries by GDP (PPP) per capita A country's gross domestic product (GDP) at purchasing power parity (PPP) per capita is the PPP value of all final goods and services produced within an economy in a given year, divided by

693-461: A key plank of Irish policy has become untenable. It is difficult to calculate the financial effect of tax havens in general due to the obfuscation of financial data. Most estimates have wide ranges (see financial effect of tax havens ). By focusing on "headline" vs. "effective" corporate tax rates, researchers have been able to more accurately estimate the annual financial tax losses (or "profits shifted"), due to corporate tax havens specifically. This

770-515: A plant, over 700 of the 6,000 employees work from home (the largest remote percentage of any Irish technology company). When the EU Commission completed their State aid investigation into Apple , they found Apple Ireland's ETR for 2004–2014, was 0.005%, on over €100bn of globally sourced, and untaxed, profits. The "employment tax" is, therefore, a modest price to pay for achieving very low taxes on global profits, and it can be mitigated to

847-410: A replacement statistic called modified gross national income (or GNI*). Ireland is one of the world's largest corporate tax havens . Ireland has, more or less, stopped using GDP to measure its economy. And on current trends [because Irish GDP is distorting EU-28 aggregate data], the eurozone taken as a whole may need to consider something similar. The statistical distortions created by the impact on

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924-491: A route for Zucman's estimated loss of 20% in EU corporate tax revenues annually. Corporate tax haven Unlike traditional tax havens , modern corporate tax havens reject they have anything to do with near-zero effective tax rates , due to their need to encourage jurisdictions to enter into bilateral tax treaties which accept the haven's base erosion and profit shifting (BEPS) tools. CORPNET show each corporate tax haven

1001-537: A tax code that shields most corporate profits from taxation, is indistinguishable from applying a near 0% rate in a normal tax code. Activists in the Tax Justice Network propose that Ireland's effective corporate tax rate was not 12.5%, but closer to the BEA calculation. Studies cited by The Irish Times and other outlets suggest that the effective tax rate is close to the headline 12.5 percent rate – but this

1078-691: A tax haven ?" For example, when it was shown in 2014, prompted by an October 2013 Bloomberg piece, that the effective tax rate of U.S. multinationals in Ireland was 2.2% (using the U.S. Bureau of Economic Analysis method), it led to denials by the Irish Government and the production of studies claiming Ireland's effective tax rate was 12.5%. However, when the EU fined Apple in 2016, Ireland's largest company, €13 billion in Irish back taxes (the largest tax fine in corporate history ),

1155-410: A territorial tax system. The U.K. became a "recipient" of U.S. corporate tax inversions, and ranked as one of Europe's leading havens. A major study now ranks the U.K. as the second largest global Conduit OFC (a corporate haven proxy). The U.K. was particularly fortunate as 18 of the 24 jurisdictions that are identified as Sink OFCs , the traditional tax havens, are current or past dependencies of

1232-411: A top–ten ranking in the 2018 Global Innovation Property Centre (GIPC) IP Index. IP has been described as the "raw materials of corporate tax avoidance", and "the leading corporate tax avoidance vehicle". Conduit OFCs are shown to be dominated by major law firms and global accounting firms, who create the lawfully constructed special purpose vehicles (SPVs) and BEPS tools that make the connections with

1309-480: Is "very good" for Ireland. "If BEPS sees itself to a conclusion, it will be good for Ireland". Feargal O'Rourke CEO PwC (Ireland) Cited "architect" of the Double Irish BEPS tool Irish Times, 2015 An example of an IP–based BEPS tool is Ireland's Capital Allowances for Intangible Assets (CAIA) tool, also known as the " Green Jersey ", which has an effective tax rate of 0–2.5%. Apple used

1386-401: Is a broad consensus that Ireland must defend its 12.5 per cent corporate tax rate. But that rate is defensible only if it is real. The great risk to Ireland is that we are trying to defend the indefensible. It is morally, politically and economically wrong for Ireland to allow vastly wealthy corporations to escape the basic duty of paying tax. If we don't recognise that now, we will soon find that

1463-521: Is a theoretical result based on a theoretical "standard firm with 60 employees" and no exports: in reality, multinational businesses and their corporate structures vary significantly. It is not just Ireland, however. The same BEA calculation showed that the ETRs of U.S. corporates in other jurisdictions was also very low: Luxembourg (2.4%), the Netherlands (3.4%) and the US for multinationals based in other parts of

1540-454: Is captured on page 34 of the OECD 2018 Ireland survey: This distortion leads to exaggerated credit cycles. The artificial/distorted "headline" GDP growth increases optimism and borrowing in the haven, which is financed by global capital markets (who are misled by the artificial/distorted "headline" GDP figures and misprice the capital provided). The resulting bubble in asset/property prices from

1617-474: Is increased. However, a key difference between the lists regards the major OECD and EU tax havens (or offshore financial centres), such as Switzerland, Ireland the Netherlands and Luxembourg (amongst others). Major regulators like the EU and the OECD don't regard OECD or EU countries as tax havens, and point to their transparency and compliance with international regulations. Academic leaders in tax haven research, and other non–governmental organizations, point to

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1694-911: Is increasingly being recognized that tax havens , or corporate tax havens , have distorted economic data which produces artificially high, or inflated, GDP-per-capita figures. It is estimated that over 15% of global jurisdictions are tax havens (see tax haven lists ). An IMF investigation estimates that circa 40% of global foreign direct investment flows, which heavily influence the GDP of various jurisdictions, are described as "phantom" transactions. A stunning $ 12 trillion—almost 40 per cent of all foreign direct investment positions globally—is completely artificial: it consists of financial investment passing through empty corporate shells with no real activity. These investments in empty corporate shells almost always pass through well-known tax havens. The eight major pass-through economies—the Netherlands, Luxembourg, Hong Kong SAR,

1771-430: Is not a material part of the financial services business for Cayman, BVI and Bermuda. While the legislation was originally resisted on extraterritoriality, human rights, privacy, international justice, jurisprudence and colonialism grounds, the introduction of these regulations have had the effect of putting these jurisdictions far ahead of onshore regulatory regimes. Modern corporate tax havens, such as Ireland, Singapore,

1848-586: Is not a measure of personal income . ( See Standard of living and GDP .) GDP (PPP) and GDP (PPP) per capita are usually measured by international dollar , which is a hypothetical currency that has the same purchasing power in every economy as the U.S. dollar in the United States . All figures are in current international dollars , and rounded to the nearest whole number . The table initially ranks each country or territory with their latest available year's estimates, and can be re-ranked by any of

1925-625: Is not easy, however. As discussed above, havens are sensitive to discussions on "effective" corporate tax rates and obfuscate data that does not show the "headline" tax rate mirroring the "effective" tax rate. Two academic groups have estimated the "effective" tax rates of corporate tax havens using very different approaches: They are summarised in the following table (BVI and the Caymans counted as one), as listed in Zucman's analysis (from Appendix, table 2). Zucman used this analysis to estimate that

2002-451: Is not the case at present. Ireland is not just a tax haven at present, it is also a corporate secrecy jurisdiction. Whereas jurisdictions traditionally labelled as tax havens have often marketed themselves as such, modern Offshore Financial Centres robustly refute the tax haven label. This is to ensure that other higher-tax jurisdictions, from which the corporate's main income and profits often derive, will sign bilateral tax-treaties with

2079-627: Is only 70% of GDP. The distortion of Ireland's economic data from corporates using Irish IP-based BEPS tools (especially the capital allowances for intangible assets tool), is so great, that it distorts EU-28 aggregate data. A stunning $ 12 trillion—almost 40 percent of all foreign direct investment positions globally—is completely artificial: it consists of financial investment passing through empty corporate shells with no real activity. These investments in empty corporate shells almost always pass through well-known tax havens. The eight major pass-through economies—the Netherlands, Luxembourg, Hong Kong SAR,

2156-710: Is strongly connected with specific traditional tax havens (via additional BEPS tool "backdoors" like the double Irish , the dutch sandwich , and single malt ). Corporate tax havens promote themselves as "knowledge economies", and IP as a "new economy" asset, rather than a tax management tool, which is encoded into their statute books as their primary BEPS tool. This perceived respectability encourages corporates to use these IFCs as regional headquarters (i.e. Google , Apple , and Facebook use Ireland in EMEA over Luxembourg , and Singapore in APAC over Hong Kong / Taiwan ). While

2233-509: Is the largest recipient of U.S. tax inversions (the U.K. is third, the Netherlands is fifth). Ireland's double Irish BEPS tool is credited with the largest build-up of untaxed corporate offshore cash in history . Luxembourg and Hong Kong and the Caribbean "triad" (BVI-Cayman-Bermuda), have elements of corporate tax havens, but also of traditional tax havens. Economic Substance legislation introduced in recent years has identified that BEPS

2310-1023: The European Parliament adopted the CORPNET approach into their frameworks for addressing tax havens. In 2018, research by Gabriel Zucman showed that using Orbis database connections specifically underestimates the scale of Ireland, which the Zucman–Tørsløv–Wier 2018 list showed is the largest Conduit OFC in the world. This aside, CORPNET's Conduits and Sinks reconcile closely with the most noted academic top ten tax haven lists. The lack of an accepted definition for identifying tax havens (and even offshore financial centres), results in different lists, including: There are "traditional" tax havens common on all these lists (e.g. some Caribbean and Channel Islands locations), which some global regulators have either blacklisted, or have issued formal warnings/threat of sanctions against, unless transparency

2387-612: The IMF and the World Bank . As estimates and assumptions have to be made, the results produced by different organizations for the same country are not hard facts and tend to differ, sometimes substantially, so they should be used with caution. Comparisons of national wealth are frequently made based on nominal GDP and savings (not just income), which do not reflect differences in the cost of living in different countries ( see List of countries by GDP (nominal) per capita ); hence, using

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2464-493: The " capital allowances for intangible assets " BEPS scheme), have the need to perform a "relevant trade" and "relevant activities" on Irish-based IP, encoded in their legislation, which requires specified employment levels and salary levels (discussed here ), which roughly equates to an "employment tax" of circa 2–3% of profits (based on Apple and Google in Ireland). For example, Apple employs 6,000 people in Ireland, mostly in

2541-476: The "headline" corporate tax rate in jurisdictions most often implicated in BEPS is always above zero (e.g. Netherlands at 25%, U.K. at 19%, Singapore at 17%, and Ireland at 12.5%), the "effective" tax rate (ETR) of multinational corporations, net of the BEPS tools, is closer to zero. To increase respectability, and access to tax treaties , some jurisdictions like Singapore and Ireland require corporates to have

2618-487: The 10 largest tax havens identified in 2010 by one of the academic founders of tax haven research, James R. Hines Jr. Hines' 2010 list of 10 major tax havens only differs in its omission of the U.K., which in 2010, had only just reformed its corporate tax system. CORPNET's top 5 Conduits and top 5 Sinks closely reconcile with the top 10 major corporate tax havens of other major academic and non–governmental organisation tax haven lists. Other tax academics have incorporated

2695-551: The 2018 Financial Secrecy Index . The Chief Minister of the IOM, Howard Quayle , announced that the CORPNET report proved that the IOM is not a tax haven. However, CORPNET researchers from the University of Amsterdam directly replied to Howard Quayle's article clarifying that while the IOM does not appear as a leading sink OFC for corporate tax avoidance, it does not mean that individuals (personal bank accounts and trusts) do not use

2772-439: The 2018 Global IP Index. A growing array of tax benefits have made London the city of choice for big firms to put everything from "letterbox" subsidiaries to full-blown headquarters. A loose regime for "controlled foreign corporations" makes it easy for British-registered businesses to park profits offshore. Tax breaks on income from patents [IP] are more generous than almost anywhere else. Britain has more tax treaties than any of

2849-555: The 24 tax havens (called Sink OFCs), without incurring tax in the Conduit OFC (or even tax in the source of funds location, where royalty payment schemes can be used). The work built on methods established in the "Offshore–Intensity Ratio", and in particular the understanding "activity" relative to the "scale" of the domestic economy in a country. At its crudest level, the Offshore-Intensity Ratio explains why

2926-499: The Apple Hollyhill Cork plant. The Cork plant is Apple's only self-operated manufacturing plant in the world (i.e. Apple almost always contracts to 3rd party manufacturers). It is considered a low-technology facility, building iMacs to order by hand, and in this regard is more akin to a global logistics hub for Apple (albeit located on the "island" of Ireland). No research is carried out in the facility. Unusually for

3003-611: The British Virgin Islands, Bermuda, the Cayman Islands, Ireland, and Singapore—host more than 85 per cent of the world's investment in special purpose entities, which are often set up for tax reasons. In 2017, Ireland's economic data became so distorted by U.S. multinational tax avoidance strategies (see leprechaun economics ), also known as BEPS actions, that Ireland effectively abandoned GDP (and GNP) statistics as credible measures of its economy, and created

3080-414: The British Virgin Islands, Bermuda, the Cayman Islands, Ireland, and Singapore—host more than 85 percent of the world's investment in special purpose entities, which are often set up for tax reasons. This distortion means that all corporate tax havens, and particularly smaller ones like Ireland, Singapore, Luxembourg and Hong Kong, rank at the top in global GDP-per-capita league tables. In fact, not being

3157-561: The CAIA (or Green Jersey) BEPS tool in Q1 2015, resulting in the " leprechaun economics " restatement of Irish GDP by 34.4 percent. Ireland has other IP–based BEPS tools (Ireland as the first OECD nexus-compliant KDB ), and is a supporter of the OECD BEPS project (see box). The Isle of Man (the "IOM") was absent from the list of top sink OFCs. The IOM appears on tax–haven lists and ranks 42 on

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3234-456: The EU stated that Apple's effective tax rate in Ireland was approximately 0.005% for the 2004-2014 period. The EU's position was found, on appeal in the EU's court, to be unsupported by the facts. However, the G7 leaders in the wake of reporting about a Microsoft subsidiary's level of taxation in 2020, have proposed an agreement on a global minimum corporate tax rate of 15%. Applying a 12.5% rate in

3311-531: The Global Corporate Ownership Network", provided a quantitative and scientific approach to the classification of tax havens. The report was the result of a multi-year investigation by political economists and computer scientists in the CORPNET research group at the University of Amsterdam. CORPNET is a European Research Council funded group at the University of Amsterdam investigating networks of corporate control. The report used

3388-472: The IOM to avoid taxes, and particularly United Kingdom VAT. Other commentators have added that the IOM is "failing as a tax haven", and is now too small to appear in major studies like the CORPNET research. The CORPNET report used legal corporate connections on the Orbis database , rather than the actual "quantum" of money, as its primary metric of analysis. In theory, the authors felt that this does not impede

3465-518: The Moody's Orbis corporate database , to examine 98 million global companies and their 71 million ownership connections (using big data computer modelling) to identify 5 global Conduit OFCs (Netherlands, United Kingdom, Ireland, Singapore and Switzerland). These are countries of high financial reputation (i.e. not formally labelled "tax havens" by OECD/EU), but who have "advanced" legal and tax structuring vehicles (and SPVs) that help legally route funds to

3542-726: The Netherlands and the U.K., are different from traditional "offshore" financial centres like Bermuda, the Cayman Islands or Jersey. Corporate havens offer the ability to reroute untaxed profits from higher-tax jurisdictions back to the haven; as long as these jurisdictions have bi-lateral tax treaties with the corporate haven. This makes modern corporate tax havens more potent than more traditional tax havens , who have more limited tax treaties, due to their acknowledged status. The Cayman Islands, BVI, Bermuda, Jersey and Guernsey are more properly now known as IFCs or OFCs. Tax academics identify that extracting untaxed profits from higher-tax jurisdictions requires several components: Once

3619-481: The U.K. (and embedded into U.K. tax and legal statute books). New IP legislation was encoded into the U.K. statute books and the concept of IP significantly broadened in U.K. law. The U.K.'s Patent Office was overhauled and renamed the Intellectual Property Office . A new U.K. Minister for Intellectual Property was announced with the 2014 Intellectual Property Act. The U.K. is now 2nd in

3696-522: The U.K.), than a traditional tax haven (e.g. Hong Kong). The Netherlands is fighting back against its reputation as a tax haven with reforms to make it more difficult for companies to set up without a real business presence. Menno Snel, the Dutch secretary of state for finance, told parliament last week that his government was determined to "overturn the Netherlands' image as a country that makes it easy for multinationals to avoid taxation". The United Kingdom

3773-464: The United Kingdom and the Netherlands have become more popular for U.S. corporate tax inversions than leading traditional tax havens , even Bermuda. However, corporate tax havens still retain close connections with traditional tax havens as there are instances where a corporation cannot "retain" the untaxed funds in the corporate tax haven, and will instead use the corporate tax haven like

3850-526: The World. When Gabriel Zucman , published a multi-year investigation into corporate tax havens in June 2018, showing that Ireland is the largest global corporate tax haven (having allegedly shielded $ 106 billion in profits in 2015), and that Ireland's effective tax rate was 4% (including all non-Irish corporates), the Irish Government countered that they could not be a tax haven as they are OECD-compliant. There

3927-468: The annual financial impact of corporate tax havens was $ 250 billion in 2015. This is beyond the upper limit of the OECD's 2017 range of $ 100–200 billion per annum for base erosion and profit shifting activities. The World Bank , in its 2019 World Development Report on the future of work suggests that tax avoidance by large corporations limits the ability of governments to make vital human capital investments. Modern corporate tax havens like Ireland,

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4004-498: The average (or mid-year) population for the same year. This is similar to nominal GDP per capita but adjusted for the cost of living in each country. In 2023, the estimated average GDP per capita (PPP) of all of the countries was Int$ 22,452. For rankings regarding wealth, see list of countries by wealth per adult . The gross domestic product (GDP) per capita figures on this page are derived from PPP calculations. Such calculations are prepared by various organizations, including

4081-484: The build-up in credit can unwind quickly if global capital markets withdraw the supply of capital. Extreme credit cycles have been seen in several of the corporate tax havens (i.e. Ireland in 2009-2012 is an example). Traditional tax havens like Jersey have also experienced this. The statistical distortions created by the impact on the Irish National Accounts of the global assets and activities of

4158-599: The contrary, the funds can be invested in assets all over the world, but their legal ownership and future gains remain in the Sink OFC. For example, the circa US$ 1 trillion of US company offshore cash is held in Sink OFCs (esp. the Caribbean). The CORPNET Report highlighted some interesting aspects of the 24 Sink OFCs: Of the wider tax environment, O'Rourke thinks the OECD base–erosion and profit–shifting (BEPS) process

4235-607: The corporate tax haven specialist to promote "respectability" and maintain OECD-compliance (critical to extracting untaxed profits from higher-taxed jurisdictions via cross-border intergroup IP charging), while enabling the corporate to still access the benefits of a full tax haven (via double Irish , dutch sandwich type BEPS tools), as needed. We increasingly find offshore magic circle law firms, such as Maples and Calder and Appleby , setting up offices in major Conduit OFCs, such as Ireland. A key architect [for Apple]

4312-871: The corporate tax haven. This gives the haven more respectability (i.e. not a " brass plate " location), and gives the corporate additional "substance" against challenges by taxing authorities. The OECD's Article 5 of the MLI supports havens with "employment taxes" at the expense of traditional tax havens . Mr. Chris Woo, tax leader at PwC Singapore, is adamant the Republic is not a tax haven. "Singapore has always had clear law and regulations on taxation. Our incentive regimes are substance-based and require substantial economic commitment. For example, types of business activity undertaken, level of headcount and commitment to spending in Singapore", he said. Irish IP-based BEPS tools (e.g.

4389-509: The countries at the top of global GDP per capita lists are mostly tax havens . The EU Parliament's Policy Department on Economic and Scientific Policies included the research in its findings for the EU Committee on Money laundering, tax avoidance and tax evasion (PANA), and by tabulating against existing EU–IMF–FSI list of tax havens, showed material gaps in EU understanding of conduits. CORPNET's top 5 Conduits and top 5 Sinks are 9 of

4466-422: The extent that the job functions are real and would be needed regardless. "Employment taxes" are considered a distinction between modern corporate tax havens, and near-corporate tax havens, like Luxembourg and Hong Kong (who are classed as Sink OFCs ). The Netherlands has been introducing new "employment tax" type regulations, to ensure it is seen as a modern corporate tax haven (more like Ireland, Singapore, and

4543-401: The goal of classification, and of making relative rankings. However, it does mean the "monetary amount" of potential tax avoidance was not calculated. The tax haven academic and author of The Hidden Wealth of Nations , Gabriel Zucman , used a different quantitative approach. Zucman focused on macro–data of national statistical accounts. In theory, the total assets in a system should equal

4620-408: The haven, and also to avoid being black-listed. This issue has caused debate on what constitutes a tax haven, with the OECD most focused on transparency (the key issue of traditional tax havens), but others focused on outcomes such as total effective corporate taxes paid. It is common to see the media, and elected representatives, of a modern corporate tax haven ask the question, "Are we

4697-607: The headline rate is not what triggers tax evasion and aggressive tax planning. That comes from schemes that facilitate [base erosion and] profit shifting [or BEPS]. Under BEPS, new requirements for country-by-country reporting of tax and profits and other initiatives will give this further impetus, and mean even more foreign investment in Ireland. If [the OECD] BEPS [Project] sees itself to a conclusion, it will be good for Ireland. Local subsidiaries of multinationals must always be required to file their accounts on public record, which

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4774-473: The largest users of conduit OFCs, need to adhere to. CORPNET's top five global conduit OFCs channel 47% of corporate offshore connections and include the following: Sink OFCs cover a broad range of locations from very small countries (e.g. the Marshall Islands), to major global financial centres (e.g. Hong Kong). Just because funds reach a Sink OFC, does not mean that they remain dormant. Quite

4851-580: The research into their understanding of tax havens. Conduit OFCs are described as having advanced legal and tax systems designed to enable corporations to route funds from high tax locations (e.g. Germany) to the sink OFCs (e.g. Bermuda). They tend to have attractive "holding company" regimes (e.g. no withholding taxes, foreign dividends exempt from taxes, capital gains reliefs, full double–tax relief), advanced tax treatment of intellectual property regimes, and large global networks of bilateral tax treaties . For example, CORPNET's five major conduit OFCs, all have

4928-642: The role of OECD and EU tax havens in tax avoidance from base erosion and profit shifting (BEPS) schemes, like the Double Irish , the Single Malt and the Dutch Sandwich . They regard them as major tax havens in their definitions of tax havens . A report published in Nature in 2017 on the analysis of offshore financial centres called: "Uncovering Offshore Financial Centers: Conduits and Sinks in

5005-473: The scale of the multinational flows rivals their own domestic economies (the IMF's sign of an OFC ). The American Chamber of Commerce Ireland estimated that the value of U.S. investment in Ireland was €334bn, exceeding Irish GDP (€291bn in 2016). An extreme example was Apple's "onshoring" of circa $ 300 billion in intellectual property to Ireland, creating the leprechaun economics affair. However Luxembourg's GNI

5082-531: The sink OFCs, by exploiting legislative loopholes such as the Double Irish and Dutch Sandwich . They advise clients on anticipating future changes (e.g. from OECD BEPS processes), that may need new loopholes (e.g. the single malt arrangement ). Other researchers into tax havens have written that professional service firms in the major OECD and EU tax havens write most of their state's relevant taxation and SPV-related legislation, so that they can create and protect loopholes, and refer to such jurisdictions as being

5159-617: The sources. * Nearly all country links in the table connect to articles titled "Income in ( country or territory )" or to "Economy of ( country or territory )". The share of the shadow economy is significant in many European countries, ranging from less than 10 to over 40 per cent of GDP. Since 2014, EU member states have been encouraged by Eurostat, the official statistics body, to include some illegal activities. There are many natural economic reasons for GDP-per-capita to vary between jurisdictions (e.g. places rich in oil and gas tend to have high GDP-per-capita figures). However, it

5236-665: The three countries [Netherlands, Luxembourg, and Ireland] on the naughty step—and an ever-falling corporate-tax rate. In many ways, Britain is leading the race to the bottom. The U.K.'s successful transformation from "donor" to corporate tax havens, to a major global corporate tax haven in its own right, was quoted as a blueprint for type of changes that the U.S. needed to make in the Tax Cuts and Jobs Act of 2017 tax reforms (e.g. territorial system, lower headline rate, beneficial IP-rate). Some leading modern corporate tax havens are synonymous with offshore financial centres (or OFCs), as

5313-434: The tools requires advanced legal and accounting skills that can create the BEPS tools in a manner that is acceptable to major global jurisdictions and that can be encoded into bilateral tax-treaties, and do not look like "tax haven" type activity. Most modern corporate tax havens therefore come from established financial centres where advanced skills are in-situ for financial structuring. In addition to being able to create

5390-408: The tools, the haven needs the respectability to use them. Large high-tax jurisdictions like Germany do not accept IP–based BEPS tools from Bermuda but do from Ireland. Similarly, Australia accepts limited IP–based BEPS tools from Hong Kong but accepts the full range from Singapore. Tax academics identify a number of elements corporate havens employ in supporting respectability: Make no mistake:

5467-510: The total liabilities. By aggregating national account data, Zucman identified an excess of liabilities over assets, implying that the missing assets (to balance the equation), are hidden in tax–havens. On this basis, in 2015, he estimated that 8% of the world's wealth (or US$ 7.6 trillion) was "missing" in offshore tax–havens. Zucman's analysis highlighted the special case of Ireland and why the Orbis database underestimates Ireland's scale as one of

5544-401: The untaxed funds are rerouted back to the corporate tax haven, additional BEPS tools shield against paying taxes in the haven. It is important these BEPS tools are complex and obtuse so that the higher-tax jurisdictions do not feel the corporate haven is a traditional tax haven (or they will suspend the bilateral tax treaties). These complex BEPS tools often have interesting labels: Building

5621-403: The world's largest corporate tax avoidance, or BEPS , hubs. In 2018, Zucman ( et alia ) showed that many of Ireland's U.S. multinationals don't appear on Orbis (e.g. Facebook), or only have a small fraction of their data on Orbis (e.g. Google and Apple). Analysed using "quantum of funds" (not "Orbis connections"), Zucman showed Ireland is one of the largest corporate tax shelters in the world, and

5698-456: Was Baker McKenzie , a huge law firm based in Chicago. The firm has a reputation for devising creative offshore structures for multinationals and defending them to tax regulators. It has also fought international proposals for tax avoidance crackdowns. Baker McKenzie wanted to use a local Appleby office to maintain an offshore arrangement for Apple. For Appleby, Mr. Adderley said, this assignment

5775-447: Was "a tremendous opportunity for us to shine on a global basis with Baker McKenzie." Several modern corporate tax havens, such as Singapore and the United Kingdom, ask that in return for corporates using their IP-based BEPS tools, they must perform "work" on the IP in the jurisdiction of the haven. The corporation thus pays an effective "employment tax" of circa 2–3% by having to hire staff in

5852-413: Was highly connected to specific Sink OFC(s). For example, Conduit OFC Switzerland was highly tied to Sink OFC Jersey. Conduit OFC Ireland was tied to Sink OFC Luxembourg, while Conduit OFC Singapore was connected to Sink OFCs Taiwan and Hong Kong (the study clarified that Luxembourg and Hong Kong were more like traditional tax havens). The separation of tax havens into Conduit OFCs and Sink OFCs, enables

5929-504: Was traditionally a "donor" to corporate tax havens (e.g. the last one being Shire plc 's tax inversion to Ireland in 2008 ). However, the speed at which the U.K. changed to becoming one of the leading modern corporate tax havens (at least up until pre- Brexit ), makes it an interesting case (it still does not appear on all § Corporate tax haven lists ). The U.K. changed its tax regime in 2009–2013. It lowered its corporate tax rate to 19%, brought in new IP-based BEPS tools, and moved to

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