Working Paper: CEPR ID: DP14756
Authors: Annelaure Delatte; Vincent Vicard; Amelie Guillin
Abstract: Complex cross-border financial structures inflate measured international investment stocks in tax havens. Using a standard gravity framework, we estimate that about 40\% of global assets (FDI, portfolio equity and debt) are `abnormal' -- unexplained -- and operated through tax havens. Abnormal stocks are increasing over time and concentrated in a limited number of jurisdictions. Six jurisdictions including three European countries are the largest contributors: Cayman, Bermuda, Luxembourg, Hong Kong, Ireland and the Netherlands. Interestingly, the Luxleaks in 2014 do not appear to have diverted cross-border investments away.
Keywords: cross-border investments; capital openness; tax havens; gravity equation
JEL Codes: F23; G21; H22; H32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tax havens (H26) | inflate measured international investment stocks (F21) |
| abnormal investment stocks (G31) | increasing over time (O49) |
| tax havens (H26) | concentration of abnormal stocks in jurisdictions (K42) |
| LuxLeaks scandal (H26) | cross-border investments (F21) |
| tax havens (H26) | distortion in geography of global finance (F65) |
| tax rates and financial secrecy (H26) | relationship between tax havens and abnormal stocks (H26) |