The governance of global wealth chains

Abstract

This article offers a theoretical framework to explain how Global Wealth Chains (GWCs) are created, maintained, and governed. We draw upon different strands of literature, including scholarship in International Political Economy and Economic Geography on Global Value Chains, literature on finance and law in Institutional Economics, and work from Economic Sociology on network dynamics within markets. This scholarship assists us in highlighting three variables in how GWCs are articulated and change according to: (1) the complexity of transactions, (2) regulatory liability, and (3) innovation capacities among suppliers of products used in wealth chains. We then differentiate five types of GWC governance -Market, Modular, Relational, Captive, and Hierarchy -which range from simple 'off shelf' products shielded from regulators by advantageous international tax laws to highly complex and flexible innovative financial products produced by large financial institutions and corporations. This article highlights how GWCs intersect with value chains, and provides brief case examples of wealth chains and how they interact.

Panama and the WTO: new constitutionalism of trade policy and global tax governance

“…Therefore, in contrast to much of the new constitutionalism literature, progressive tax policy does not necessarily equal protecting national jurisdictions from transnational policy lock-ins. This is true especially in an era when the Big 4 auditing companies are helping secrecy jurisdictions to design their tax laws and large corporations can easily discern their internal wealth chains from value chains (Christensen and Murphy 2004;Otusanya 2011;Seabrooke and Wigan 2014;Seabrooke and Wigan in press;Sikka in press;Hampton 2005, Sikka andWillmott 2010). Rather, progressive trade policy should be seen as a tool used by sovereign nations to push other sovereigns to adhere with effective tax information exchange and other similar initiatives.…”

Taxing the powerful, the rise of populism and the crisis in Europe: the case for the EU Common Consolidated Corporate Tax Base

“…It ought to, for example, address global wealth chain (GWC) potentials. That is, appropriately explore how wealth is captured and protected rather than merely focus on how more wealth might be created (Seabrooke and Wigan, 2017). To be effective it must also encourage and help to shape appropriate commitments from MNEs to pay fair tax and by states to ensure that tax is paid.…”

Politics of Intra-firm Trade: Corporate Price Planning and the Double Role of the Arm’s Length Principle

“…The recent decades have also seen a massive growth in the services trade, in tandem with a trend by which decentred corporations (Desai 2008) separate their internal wealth chains (Seabrooke and Wigan 2017) from their value chains (Gereffi andKorzeniewicz 1994, Henderson et al 2002), for example, by centralising the ownership of intangible rights from several group companies to one 'Intellectual Property company', often located in a lowtax jurisdiction (see Palazzi 2011: 24). 8 These developments have made it even more difficult to determine the comparable market prices, even though states have begun to monitor the intra-firm trade more rigorously.…”

“…Most transfer pricing-related profit shifting is conducted with small deviations from the estimated market prices, with major impacts on the geographical distribution of income within large corporations (Seabrooke and Wigan 2017). 9 Companies can, however, also engage in more aggressive forms of planning, enabled by the difficulties states face in enforcing and monitoring their transfer pricing rules.…”