Shedding light on the channels of the corporate networks related to the offshore financial business

The ties of predominantly multinational companies to tax havens have been a well-known factor for a long time. One had guessed their intensity and their concentration on only a few countries and jurisdictions; however, the enormous extent, as shown by the most recent study of the University of Amsterdam, is still coming as a big surprise.

Untangling the web of participation

The research project corpnet, which has been spread over several years, is based on a corporate database, which contains information relating to ownership structures or turnover of millions of companies worldwide. The volume of data is processed by a software programme, which initially untangles companies and owners and depicts each company’s investments. Based on these networks, it is possible to work out in which country the investment chains begin and where they end, but also which intermediate stations are used to redirect them. At the same time, a picture emerges showing the concentrations in individual countries. Hence, the latter, second category represents the turnover of individual states, through which money flows to tax havens – and possibly back again.

Immense turnover flows are concentrated on a small number of trade centres

Hence, if one compares the turnover flows with the economic output of the respective country, the British Virgin Islands, followed by Luxembourg rank, in first place – the EU country is here the big surprise. Hong Kong and the Channel Island Jersey, Cyprus and Malta are also among the 24 established offshore centres. Basically the already known tax havens, which attract foreign capital. The transfer sums and investments respectively exceed the GDP of tax havens many times over.

The data analysis provides an interesting insight with regard to the most important transit points, hence those countries, which are used to channel investments into tax havens. Initially, there is an immense concentration on only five countries, led by the Netherlands, Great Britain, Switzerland, Singapore and Ireland. Data shows that almost half of investments in tax havens are channelled via these five countries, whereby it was also established that the highest concentration was in respect of Dutch companies with 23 % and British with 14 %.

Need for action

Even though the researchers admit methodical problems with this data – asset flows of private individuals are generally missing or corporate data were not accessible or completely lacking – this study nevertheless represents an approach to untangle the network of offshore financial centres. Apart from that, the study contributes to improving both quality and availability of data, thereby creating more transparency. Therefore, one of our most important demands is to disclose economic owners and beneficiaries respectively in an international register. Regulating international financial flows can only initiated by economically potent states. If the OECD only identifies Trinidad and Tobago as a tax haven and if the EU so far could not even bring itself to produce a list of tax havens, there can only be one demand – to increase the political pressure in the fight against tax havens.