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2017 ; 7
(1
): 6246
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Uncovering Offshore Financial Centers: Conduits and Sinks in the Global Corporate
Ownership Network
#MMPMID28740120
Sci Rep
2017[Jul]; 7
(1
): 6246
PMID28740120
show ga
Multinational corporations use highly complex structures of parents and
subsidiaries to organize their operations and ownership. Offshore Financial
Centers (OFCs) facilitate these structures through low taxation and lenient
regulation, but are increasingly under scrutiny, for instance for enabling tax
avoidance. Therefore, the identification of OFC jurisdictions has become a
politicized and contested issue. We introduce a novel data-driven approach for
identifying OFCs based on the global corporate ownership network, in which over
98 million firms (nodes) are connected through 71 million ownership relations.
This granular firm-level network data uniquely allows identifying both sink-OFCs
and conduit-OFCs. Sink-OFCs attract and retain foreign capital while conduit-OFCs
are attractive intermediate destinations in the routing of international
investments and enable the transfer of capital without taxation. We identify 24
sink-OFCs. In addition, a small set of five countries - the Netherlands, the
United Kingdom, Ireland, Singapore and Switzerland - canalize the majority of
corporate offshore investment as conduit-OFCs. Each conduit jurisdiction is
specialized in a geographical area and there is significant specialization based
on industrial sectors. Against the idea of OFCs as exotic small islands that
cannot be regulated, we show that many sink and conduit-OFCs are highly developed
countries.