Skip to main content Accessibility help
×
Home

Offshore financial activity and tax policy: evidence from a leaked data set*

Published online by Cambridge University Press:  07 March 2016


Paul Caruana-Galizia
Affiliation:
Institute of Economic History, Humboldt-University of Berlin, Germany E-mail: caruanap@hu-berlin.de
Matthew Caruana-Galizia
Affiliation:
International Consortium of Investigative Journalists, USA E-mail: mcaruana@icij.org
Corresponding

Abstract

We assess the European Union’s (EU) most significant international tax policy. The 2005 Tax and Savings Directive obliges cooperating jurisdictions to withhold tax or report on interest income earned by entities whose beneficial owner is an EU resident. As the Directive applies only to beneficial ownership in cooperative jurisdictions, it can be circumvented by transferring ownership to a non-EU resident or company or by transferring the entity to a non-cooperative jurisdiction. Using a database on individual offshore entities leaked from two firms in 2013, we compare the response of EU-owned entities with a control group of non-EU-owned entities. We show that the growth of EU-owned entities declined immediately after the Directive’s implementation, whereas that of non-EU-owned entities remained stable. We observe the substitution of EU ownership for non-EU ownership, as well as the substitution of cooperative for non-cooperative offshore jurisdictions. This calls for anti-evasion policies that are broader in scope and scale.


Type
Research Article
Copyright
© Cambridge University Press, 2016 

Access options

Get access to the full version of this content by using one of the access options below.

Footnotes

*

The views expressed in this article are the sole responsibility of the authors and do not necessarily reflect those of the International Consortium of Investigative Journalists or the Humboldt-University of Berlin.


References

Angrist, J. and Pischke, J. (2009) Mostly Harmless Econometrics. Princeton, NJ: Princeton University Press.Google Scholar
Bank for International Settlements (BIS) (2014) Consolidated Banking Statistics, http://www.bis.org/statistics/consstats.htm (accessed 26 February 2015).Google Scholar
British Virgin Islands Financial Services Commission (BVI FSC) (2008) Statistical Bulletin, Vol. 13, December, http://www.bvifsc.vg/Portals/2/Statistical%20Bulletin%20No.%2013%20-%20December%202008.pdf (accessed 7 June 2015).Google Scholar
Commonwealth Trust Limited (1999) Due Diligence Fact Sheet, https://www.documentcloud.org/documents/661042-b8c544b10c660f91e217274785218cbc-duediligencereply (accessed 10 March 2015).Google Scholar
Commonwealth Trust Limited (2008) BVI Incorporation Volumes, https://www.documentcloud.org/documents/664730-f594dbd9b43ccac9d040c471c4e66bf8-20080923-2213 (accessed 10 March 2015).Google Scholar
European Commission (EC) (2003) Council Directive 2003/48/EC of 3 June 2003, on Taxation of Savings Income in the Form of Interest Payments. Official Journal of the European Union L 157/38, 1–11.Google Scholar
European Commission (EC) (2008) Report from the Commission to the Council, in accordance with Article 18 of Council Directive 2003/48/EC on taxation of savings income in the form of interest payments, COM(2008) 552 final, Brussels, 15 September 2008, pp. 1–10.Google Scholar
Global Financial Data (2015) Exchange Rate Database, https://www.globalfinancialdata.com/Databases/ExchangeRateDatabase.html (accessed 25 February 2015).Google Scholar
Government of Samoa (2011) Statistical Abstract 2011, http://www.sbs.gov.ws/index.php/new-document-library?view=download&fileId=1474 (accessed 7 June 2015).Google Scholar
Helminen, M. (2011) EU Tax Law: Direct Taxation. Amsterdam: International Bureau of Fiscal Documentation.Google Scholar
Hemmelgarn, T. and Nicodème, G. (2009) Tax Co-Ordination in Europe: Assessing the First Years of the EU-Savings Taxation Directive. European Commission Working paper No. 18.Google Scholar
Her Majesty’s Revenue and Customs (2014) Liechtenstein Disclosure Facility (LDF) FAQs Template, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/398542/Yield_stats.pdf (accessed 25 February 2015).Google Scholar
Inland Revenue Service (2012) 2012 Offshore Voluntary Disclosure Program, http://www.irs.gov/uac/2012-Offshore-Voluntary-Disclosure-Program (accessed 25 February 2015).Google Scholar
International Consortium of Investigative Journalists (ICIJ) (2013a) ICIJ Offshore Leaks Database-Data Caveats and Limitations, https://offshoreleaks.icij.org/about/caveats (accessed 25 February 2015).Google Scholar
International Consortium of Investigative Journalists (ICIJ) (2013b) Secrecy for Sale: Inside the Global Offshore Money Maze, http://www.icij.org/offshore (accessed 25 February 2015).Google Scholar
International Consortium of Investigative Journalists (ICIJ) (2013c) How We Built the Offshore Leaks Database, http://www.icij.org/blog/2013/06/how-we-built-offshore-leaks-database (accessed 2 March 2015).Google Scholar
International Consortium of Investigative Journalists (ICIJ) (2013d) How ICIJ’s Project Team Analyzed the Offshore Files, http://www.icij.org/offshore/how-icijs-project-team-analyzed-offshore-files (accessed 2 March 2015).Google Scholar
International Consortium of Investigative Journalists (ICIJ) (2015) Swiss Leaks; the Leaked HSBC Files Offer a Rare Glimpse Inside One of the World’s Most Private Banking Systems, http://projects.icij.org/swiss-leaks/ (accessed 25 February 2015).Google Scholar
International Monetary Fund (IMF) (2014) World Economic and Financial Surveys: World Economic Outlook Database, http://www.imf.org/external/pubs/ft/weo/2014/02/weodata/index.aspx (accessed 25 February 2015).Google Scholar
Johannesen, N. (2014) Tax Evasion and Swiss Bank Deposits. Journal of Public Economics 111: 4662.CrossRefGoogle Scholar
Johannesen, N. and Zucman, G. (2014) The End of Bank Secrecy? An Evaluation of the G20 Tax Haven Crackdown. American Economic Journal: Economic Policy 6(1): 6591.Google Scholar
Klautke, T. and Weichenridder, A. (2010) Interest Income Tax Evasion, the EU Savings Directive and Capital Market Effects. Fiscal Studies 31(1): 151170.CrossRefGoogle Scholar
Norddeutscher Rundfunk (2013) CTL: Spezialisten für Steueroasen, http://www.ndr.de/home/offshoreleaks129.html (accessed 10 March 2015).Google Scholar
Organisation for Economic Cooperation and Development (OECD) (2004) The OECD’s Project on Harmful Tax Practices: The 2004 Progress Report, http://www.oecd.org/ctp/harmful/30901115.pdf (accessed 25 February 2015).Google Scholar
Organisation for Economic Cooperation and Development (OECD) (2006) Tax Co-Operation 2010: Towards a Level Playing Field, http://www.oecd.org/tax/transparency/44430286.pdf (accessed 25 February 2015).Google Scholar
Organisation for Economic Cooperation and Development (OECD) (2010) Offshore Voluntary Disclosure: Comparative Analysis, Guidance, and Policy Advice, http://www.oecd.org/ctp/exchange-of-tax-information/46244704.pdf (accessed 25 February 2015).Google Scholar
Panayi, C. H. J. I. (2013) European Union Corporate Tax Law. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Portcullis TrustNet (TNET) (2015) About Portcullis Group of Companies, http://www.portcullis-trustnet.com/en/about_us/about_group/ (accessed 10 March 2015).Google Scholar
Rixen, T. and Schwarz, P. (2012) How Effective is the European Union’s Savings Tax Directive? Evidence from Four EU Member States. Journal of Common Market Studies 50(1): 151168.CrossRefGoogle Scholar
Swiss Financial Market Supervisory Authority (2009) EBK Investigation of the Cross-Border Business of UBS AG with its Private Clients in the USA: A Summary Report, http://www.finma.ch/d/aktuell/Documents/kurzbericht-ubs-x-border-20090218-e.pdf (accessed 25 February 2015).Google Scholar
US Securities and Exchange Commission (2009) Litigation Release No. 20905, 18 February, https://web.archive.org/web/20130103115944/http://www.sec.gov/litigation/litreleases/2009/lr20905.htm (accessed 25 February 2015).Google Scholar
World Bank (2011) The Puppet Masters: How the Corrupt Use Legal Structures to Hide Stolen Assets and What To Do About It, http://star.worldbank.org/star/publication/puppet-masters( accessed 10 March 2015).Google Scholar
Zitzewitz, E. (2012) Forensic Economics. Journal of Economic Literature 50(3): 731769.CrossRefGoogle Scholar
Zucman, G. (2013a) The Missing Wealth of Nations: Are Europe and the US Net Debtors or Net Creditors? Quarterly Journal of Economics 128(3): 13211364.CrossRefGoogle Scholar
Zucman, G. (2013b) La Richesse Cachée Des Nations: Enquete Sur les Paradis Fiscaux. Paris: Seuil.Google Scholar

Altmetric attention score


Full text views

Full text views reflects PDF downloads, PDFs sent to Google Drive, Dropbox and Kindle and HTML full text views.

Total number of HTML views: 23
Total number of PDF views: 285 *
View data table for this chart

* Views captured on Cambridge Core between September 2016 - 25th November 2020. This data will be updated every 24 hours.

Hostname: page-component-57c975d4c7-v6xt5 Total loading time: 0.552 Render date: 2020-11-25T00:51:38.349Z Query parameters: { "hasAccess": "0", "openAccess": "0", "isLogged": "0", "lang": "en" } Feature Flags last update: Tue Nov 24 2020 23:56:34 GMT+0000 (Coordinated Universal Time) Feature Flags: { "metrics": true, "metricsAbstractViews": false, "peerReview": true, "crossMark": true, "comments": false, "relatedCommentaries": false, "subject": true, "clr": false, "languageSwitch": false }

Send article to Kindle

To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle.

Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Offshore financial activity and tax policy: evidence from a leaked data set*
Available formats
×

Send article to Dropbox

To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Dropbox.

Offshore financial activity and tax policy: evidence from a leaked data set*
Available formats
×

Send article to Google Drive

To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Google Drive.

Offshore financial activity and tax policy: evidence from a leaked data set*
Available formats
×
×

Reply to: Submit a response


Your details


Conflicting interests

Do you have any conflicting interests? *