The UK is number two on a list of the top five countries used by multinational corporations to access low-tax financial centres in order to minimise their tax liabilities, according to researchers at the University of Amsterdam
The researchers have developed a data model to investigate which jurisdictions are used by corporations as a staging post on the way to those countries which are more widely recognised as tax havens.
They have dubbed these ‘conduit-offshore financial centres (OFCs)’ and argue they are attractive intermediate destinations and enable the transfer of capital without taxation. According to estimates, 47% of corporate offshore investment is channelled via just five countries.
Top of the list is the Netherlands, responsible for 23%, followed by the UK with 14%. They are followed by Switzerland (6%), Singapore (2%) and Ireland (1%).
In addition the researchers have analysed what they term ‘sink-OFCs’, which covers jurisdictions which seek to attract and retain foreign capital. Their list of 24 sink-OFCs is headed by the British Virgin Island, Luxembourg and Hong Kong, followed by Jersey, Bermuda and Cyprus, with Taiwan in seventh place and classed as ‘an un-noticed tax haven’.
The report states: ‘OFCs are often portrayed as small, exotic, far away islands that are difficult if not impossible to regulate. We show that many OFCs are in fact highly developed countries.
‘18 out of 24 sink-OFCs have a current or past dependence to the UK, which highlights the central role of London in offshore finance.’
The researchers argue that regulators should consider targeting conduit-OFCs as a more effective approach than targeting sink-OFCs. This is because while new territories with low or no corporate taxes are continuously emerging, in contrast the conditions for conduit-OFCs (numerous tax treaties, strong legal systems, good reputation) can only be found in a few countries.
The University of Amsterdam’s Offshore Financial Centre research is here.