‘Only five big countries act as conduit-OFCs,’ the researchers from Corpnet said in a new report. ‘Together these five conduits channel 47% of corporate offshore investment from tax havens, according to the data we analysed.’
The two biggest conduits by far are the Netherlands (23%) and the United Kingdom (14%), followed by Switzerland (6%), Singapore (2%) and Ireland (1%).
The researchers set out to identify countries or jurisdictions that play a role in corporate ownership chains incommensurate with the size of their domestic economies.
‘Our results show that offshore finance is not the exclusive business of exotic small islands far away. Countries such as the Netherlands and the United Kingdom play a crucial yet previously hidden role as conduits of offshore finance on its way to tax havens,’ the rsearchers said.
They analysed the global network of ownership relationships, with information about over 98 million firms, differentiating between 24 ‘sink-OFCs’ which attract and retain foreign capital such as the British Virgin Islands and the Cayman Islands and five ‘conduit-OFCs’ like the Netherlands.
Although most of the tax havens were as to be expected, Taiwan was a surprise entrant on the list, the researchers said.
‘We find a clear geographical specialisation in the offshore financial network,’ the report said. ‘The Netherlands is the conduit between European companies and Luxembourg. The United Kingdom is the conduit between European countries and former members of the British Empire, such as Hong Kong, Jersey, Guernsey or Bermuda.’
The researchers hope their findings will enable regulators working to end tax evasion target the policy to the sectors and territories where the offshore activity concentrates. ‘While efforts usually focus on small exotic islands, we showed that the main sinks of corporate ownership chains are highly developed countries which have signed numerous tax treaty agreements,’ the report said.