Capital Flight, Safe Havens, and Secrecy Jurisdictions

Abstract

The terms "safe haven" and "secrecy jurisdiction" are arguably more appropriate than "tax haven" or even "offshore financial center" in discussing capital flight. Florida, for example, is thought to be the main destination for capital flight from Latin America, though it is rarely-if ever-listed under either of the last two headings. Most capital flight is thought to reflect the transfer-typically to jurisdictions characterized by strong financial secrecy regulations-of the receipts of plunder, money laundering, and tax evasion. These same jurisdictions are occasionally used by governments to dodge reparations, evade the impact of sanctions, and/or covertly fund political interference in rival states. The paper considers how capital flight safe havens operate. It also reviews the arguments over financial secrecy laws and practices, and considers recent multilateral and unilateral attempts-by the OECD, the EU, the US and others-to counter secrecy abuses.

Strategies for Addressing Capital Flight

“…Transfer pricing is the manipulation of prices assigned, for accounting purposes, to intra-firm trade in goods and services so as to park corporate profits in low-tax (or no-tax) jurisdictions. Examples of transfer pricing practices by multinational corporations operating in Africa are provided in (Barry, 2014) and (Kedir, 2014). The beer manufacturer SAB Miller has been reported to pay less tax than an operator of a beer kiosk in Ghana (Action Aid, 2010).…”

“…Mopani, the Zambian branch of Glencore, declared zero profits in its copper mining in Zambia thanks to transfer pricing (Barry, 2014). These cases are only illustrations of a pervasive practice by multinational companies in the manufacturing and resource extraction sectors in African countries.…”

“…To conceal profits from African tax authorities, for example, a multinational firm may report inflated payments for royalties, patent rights, or consultant services to subsidiaries elsewhere. Similarly, the firm may report artificially low prices received for goods or services exported from Africa to subsidiaries in other countries (Barry, 2014;Kedir, 2014).…”

Una investigación sobre migración en el marco de la seguridad humana

“…El estado de Florida es el principal destino de la fuga de capitales de América Latina(Barry, 2014).…”