شبکه های گریزگاه مالیاتی و نقش چهار شرکت حسابداری بزرگ Tax haven networks and the role of the Big 4 accountancy firms

1. Introduction Given the impact that the recent financial crisis of 2008 has had on the public finances of developed economies, the use of tax avoidance measures by multinational enterprises (MNEs) has come under increasing scrutiny from various governments and civil society organisations across the world. High profile cases, such as the tax affairs of Amazon, Facebook1 and Google have received widespread media attention. Zucman (2015) finds that 55 percent of the foreign profits of US firms are located in tax havens; whilst the Tax Justice Network estimates that around 25 percent of US firms’ global profits are shifted out of jurisdictions where real economic activity takes place, resulting in a global revenue loss of around $130 billion a year2 (Cobham & Janský, 2015). The ‘Big 4′ accountancy firms Deloitte, EY, KPMG and PwC, play an important role not only in the accounting services they provide for global MNEs, but in the wider provision of financial services ranging from tax advice to company formation. Recently, the leaked Panama Papers of 2016 revealed the details of thousands of anonymously owned companies across multiple justifications. These included apparent PwC entities based in jurisdictions known as tax havens, including for example the Cayman Islands, Gibraltar, Luxembourg and Mauritius. Apparent KPMG entities were found based in Guernsey, Hong Kong, Jersey and Switzerland.3 In regards to the Big 4′s role in the overall tax strategy of MNEs, it is the earlier ‘LuxLeaks’ of November 2014 which has provided a number of clear insights. These documents showed that PwC assisted MNEs to obtain at least 548 legal but secret tax rulings in Luxembourg from 2002 to 2010. The rulings allowed MNEs to channel hundreds of billions of dollars through Luxembourg, arising from economic activities that took place in other jurisdictions and with effective tax rates so low that they saved billions of dollars in taxes. Subsequent leaks showed that Deloitte, EY and KPMG had also brokered such tax rulings. The Big 4 also frequently provide advice to governments on the design of tax policy − sometimes seconding staff to draft laws − and advocate publicly and privately for particular policy changes, nationally and internationally in fora such as the OECD. As such, they have both the expertise and influence by which they may be able to reduce the effective tax rates of their clients. This paper therefore, examines the impact that the Big 4 accountancy firms have on the extent and complexity of MNEs tax haven activity for a sample of developed economies. We explain this phenomenon of managing and maintaining a network of tax haven subsidiaries by identifying a set of associated firm- and country-level determinants, which are based on our theoretical framework that adopts internalisation theory (Jones and Temouri, 2016; Rugman, 1980; , 2010). We test our hypotheses on a panel dataset that includes 5912 MNEs from 12 developed countries over the period 2005–2013. Importantly, our data uniquely identifies the number of tax haven subsidiaries each MNE owns annually.