Computer scientists have worked to uncover the way the Netherlands, the UK, Ireland, Singapore and Switzerland, in particular, are used by multinationals to channel investments onto well-known offshore centres (OFCs).
According to the research which was first reported by online journal Quartz, the five countries are used by multinationals to re-route capital to what it calls “sink” offshore centres to avoid tax.
Researchers Javier Garcia-Bernardo, Jan Fichtner, Frank Takes and Eelke Heemskerk said they identified new ways of detecting the conduits and the offshore centres by examining “complex” ownership structures of global firms.
“We identify 24 sink-OFCs. In addition, a small set of five countries, the Netherlands, the UK, Ireland, Singapore and Switzerland — canalise the majority of corporate offshore investment as conduit-OFCs. Each conduit jurisdiction is specialised in a geographical area and there is significant specialisation based on industrial sectors,” they wrote in the paper that is available online.
“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,” they said.
Led by the Organisation for Economic and Co-operation and Development, the rich countries have limited the freedom of offshore centres.
Ireland and the Netherlands have started to phase out the worst of the so-called double Irish and Dutch sandwich accounting practices used by multinationals to pass money onto offshore centres.
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