The Governance of Publicly Traded Limited Liability Companies

Arbitrage spaces in the offshore world: Layering, ‘fuses’ and partitioning of the legal structure of modern firms

“…As OFCs tend to levy low taxes on corporations and host relatively minor or inconsequential product markets, they are believed to be primarily performing tax minimization tasks for the corporate sector. Much of the recent research seems to validate this assumption (Alstadsæter et al, 2018; Clark et al, 2015; Clausing, 2016; Cobham and Janský, 2018; Dowd et al, 2017; Garcia-Bernardo et al, 2017; Gordon, 2016; Gumpert et al, 2016; Hines and Rice, 1994; Kaye, 2014; Phillips et al, 2017; Zucman, 2015). OFCs are considered niche players in the global economy, exploiting their size and the right to write laws in their developmental strategies (Roberts, 1995).…”

“…Dividends' repatriation would be subject to the rules and regulations of the home country, the intermediary's location country, and rules of double taxation and the like signed between the two countries. The rules and regulations of the intermediary's location are therefore crucial, as the combination of entity law and IAD ensures the location of a subsidiary as an intermediary on a corporate chain changes the regulatory calculus of an investment and thus can create opportunities for arbitrage (Brunson, 2012;Eicke, 2009;Gajewski, 2013;Gomtsian, 2015).…”

“…This aspect of corporate organization and its effects, argue Haberly and Wójcik, has been neglected so far because of the ‘compartmentalized approaches to the study of corporate control’ (Haberly and Wójcik, 2017; see also Clark et al, 2015; Haberly and Wójcik, 2015a, 2015b; Hall, 2017). There is a great deal of discussion of corporate ‘structures’ employed in tax avoidance, and far less of structures used for other regulatory frictions (Eicke, 2009; Gordon, 2016; Hodaszy, 2017; Lee and Gordon, 2005). Zucman suggests about 80% of OFC subsidiaries are used for avoidance purposes, while a recent IMF estimates that about 30% are ‘phantom’ investments (Damgaard et al, 2019).…”