Governments' revenues are lower when multinational enterprises avoid paying corporate income tax by shifting their profits to tax havens. In this paper, we ask which countries' tax revenues are affected most by this tax avoidance and how much. To estimate the scale of profit shifting, we begin by observing that the higher the share of foreign direct investment from tax havens, the lower the reported rate of return on this investment. Similarly to the United Nations Conference on Trade and Development's World Investment Report 2015, we argue that the reported rate of return is lower due to profit shifting. Unlike the report, however, we provide illustrative country-level estimates of profit shifting for as many countries as possible, including low-income ones, which enables us to study the distributional effects of international corporate tax avoidance. We compare estimated corporate tax revenue losses, relative to their GDP and tax revenues, of country groups classified by income per capita and we find that there are almost no statistically significant differences across these groups. Furthermore, we compare our results with four other recent studies that use different methodologies to estimate tax revenue losses due to profit shifting. In the first such comparison made, we find that most studies identify some differences across income groups, but the nature of these differences varies across the studies.

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Governments' revenues are lower when multinational enterprises avoid paying corporate income tax by shifting their profits to tax havens. In this paper, we ask which countries' tax revenues are affected most by this tax avoidance and how much. To estimate the scale of profit shifting, we begin by observing that the higher the share of foreign direct investment from tax havens, the lower the reported rate of return on this investment. Similarly to the United Nations Conference on Trade and Development's World Investment Report 2015, we argue that the reported rate of return is lower due to profit shifting. Unlike the report, however, we provide illustrative country-level estimates of profit shifting for as many countries as possible, including low-income ones, which enables us to study the distributional effects of international corporate tax avoidance. We compare estimated corporate tax revenue losses, relative to their GDP and tax revenues, of country groups classified by income per capita and we find that there are almost no statistically significant differences across these groups. Furthermore, we compare our results with four other recent studies that use different methodologies to estimate tax revenue losses due to profit shifting. In the first such comparison made, we find that most studies identify some differences across income groups, but the nature of these differences varies across the studies.

The EU faces large amounts of financial secrecy supplied to it by secrecy jurisdictions. In this chapter, we use the Bilateral Financial Secrecy Index to quantify which jurisdictions supply most secrecy to EU Member States. The chapter assesses the progress of two recent EU policy efforts to tackle financial secrecy: automatic exchange of country-by-country reporting (CbCR) data and black and grey list of non-cooperative jurisdictions. It is found that 34 per cent of the financial secrecy faced by the EU is supplied by other Member States, whose a priori exclusion from the blacklisting exercise reveals its fundamental flaw. Further 13 per cent is supplied by the EU’s dependencies, mainly the UK’s Cayman Islands, Bermuda, and Guernsey. The jurisdictions that supply the most secrecy not covered by automatic information exchange of CbCR data are the British Virgin Islands, United States, and Curacao. Finally the chapter discusses policy recommendations that stem from our analysis.

Secrecy jurisdictions provide opportunities for nonresidents to escape the laws and regulations of their home countries by allowing them to hide their identities. In this paper we quantify which jurisdictions supply secrecy to which countries and assess how successful countries are in targeting that secrecy with their policies. To that objective, we develop the Bilateral Financial Secrecy Index (BFSI) which maps the financial secrecy faced by 82 countries and supplied to them by 131 jurisdictions, thus providing the study of the world of financial secrecy with unprecedented nuance. We then use the BFSI to evaluate the progress of two recent policy initiatives designed to curb financial secrecy: automatic information exchange (AIE) and the blacklisting of noncooperative jurisdictions. By embedding the role of power in the center of our analytical framework, we reconcile the apparently conflicting findings of the existing literature on the effectiveness of these policies. We show that secrecy jurisdictions engage in selective resistance depending on whom they are dealing with, and that the hypocrisy of Organisation for Economic Co‐Operation and Development member countries lies at the heart of the design and operation of the AIE system and the blacklisting exercise. We argue that focusing policy on the most relevant secrecy jurisdictions, which – despite its pivotal role in recent offshore document leaks – only rarely include Panama, would enable countries to more effectively mitigate the harm caused by financial secrecy.