{ "title": "The True Cost of Global Tax Havens – IMF F&D", "sourceUrl": "https://www.imf.org/en/publications/fandd/issues/2019/09/tackling-global-tax-havens-shaxon", "canonical": "https://www.imf.org/en/publications/fandd/issues/2019/09/tackling-global-tax-havens-shaxon", "overlayPath": "/en/publications/fandd/issues/2019/09/tackling-global-tax-havens-shaxon/index.md", "summary": "Nicholas Shaxson explains why the many billions attracted by tax havens do harm to sending and receiving nations alike, and how best to tackle this global economic challenge.", "sections": [ { "heading": "Overview", "content": "- Tax havens are far bigger and more central to the global economy than commonly perceived and the largest havens are often located in rich jurisdictions or their territories.\n- Tax havens enable escape from taxes, financial regulations, disclosure, and criminal liability, tilting the playing field toward large financial institutions and multinationals and against small and medium enterprises.\n- Political damage includes hiding places for illicit activities of elites and increased financial instability risks for emerging market economies." }, { "heading": "Scale and distribution of losses and holdings", "content": "- Tax havens collectively cost governments between $500 billion and $600 billion a year in lost corporate tax revenue.\n- Low-income economies account for some $200 billion of that lost corporate tax revenue.\n- Low-income economies’ hit as a percentage of GDP is larger than for advanced economies, and exceeds the roughly $150 billion they receive each year in foreign development assistance.\n- American Fortune 500 companies alone held an estimated $2.6 trillion offshore in 2017.\n- Individuals have stashed $8.7 trillion in tax havens (Gabriel Zucman, 2017 estimates).\n- James S. Henry’s (2016) more comprehensive estimate yields up to $36 trillion held offshore.\n- Both estimates imply global individual income tax losses at around $200 billion a year, to be added to the corporate total." }, { "heading": "Mechanisms of profit shifting and definitions", "content": "- The author’s working definition of a tax haven emphasizes “escape” and “elsewhere.”\n- The international corporate tax system treats multinationals as “separate entities” under the arm’s length principle, a fiction that enables profit shifting.\n- Transfer pricing manipulation example: a firm’s affiliate in a low-tax haven holds a patent and charges high royalties to affiliates in high-tax countries.\n- Alternative described: “unitary tax with formulary apportionment,” which treats a multinational as a single entity and apportions profits geographically according to a formula (sales, employment, tangible assets).\n- Practical and political difficulties exist for formulary apportionment, but it is presented as simpler, fairer, and more rational than current practice." }, { "heading": "Empirical trends and sectoral impacts", "content": "- Average corporate tax rates declined byhalf, from 49 percent in 1985 to 24 percent today.\n- For US multinationals, corporate profit shifting into tax havens rose from an estimated 5 percent to 10 percent of gross profits in the 1990s to about 25 to 30 percent today.\n- Offshore capital tends to drain from poor countries to rich ones.\n- Research on “too much finance” indicates financial sector growth is beneficial up to an optimal point, after which it harms economic growth; most advanced economies, including major tax havens, have passed that point.\n- Concept introduced: the “finance curse”—an oversize financial sector produces effects analogous to a resource curse (brain drain, inequality, higher local prices, boom-bust cycles, rent seeking, loss of entrepreneurship, and financialization)." }, { "heading": "Policy responses, reforms, and international initiatives", "content": "- Post-2008 political pressure, Panama Papers and Luxembourg Leaks, and activism led to OECD initiatives:\n - Common Reporting Standard (CRS) for automatic exchange of financial information; CRS has loopholes (passport-based residence claims; the United States’ limited reciprocity under FATCA makes it a geographic loophole).\n - OECD estimated that 90 countries had shared information on 47 million accounts worth €4.9 trillion; bank deposits in tax havens reduced by 20 to 25 percent; voluntary disclosures ahead of implementation generated €95 billion in additional tax revenue for OECD and G20 members.\n - Base erosion and profit shifting (BEPS) project aimed at realigning taxation with economic substance but was seen as limited, particularly for the digitalized economy.\n- Political and institutional shifts in 2019:\n - January 2019: the OECD publicly conceded a need for “solutions that go beyond the arm’s length principle.”\n - March 2019: Christine Lagarde called the arm’s length method “outdated” and “especially harmful to low-income countries,” urging moves toward formula-based approaches.\n - May 2019: the OECD published a “road map” proposing reforms based on two pillars: (1) determining where tax should be paid and on what basis and what portion of profits should be taxed on that basis; and (2) getting multinationals to pay a minimum level of tax.\n- Incremental and data-driven steps: country-by-country reporting and publication of multinational breakdowns could provide data for international allocation formulas.\n- Enforcement lesson from Switzerland: targeting private enablers (bankers, banks, accountants, lawyers) can prompt reform; effective international responses must include strong sanctions against private enablers of tax evasion and other crimes." }, { "heading": "Strategic approaches and recommendations", "content": "- Move toward unitary taxation with formulary apportionment (gradual or evolutionary implementation possible through stepping-stones such as enhanced transparency and country-by-country data).\n- Strengthen sanctions and enforcement against private enablers of secrecy and evasion (accountants, lawyers, bankers).\n- Use unilateral actions by jurisdictions that recognize hosting offshore financial centers is detrimental—stepping out of the race to the bottom can improve domestic well-being.\n- Pursue multilateral reforms while acknowledging collective-action challenges and incentives for jurisdictions to cheat; complement cooperative approaches with measures that change domestic incentives in havens.\n- Continue research into the finance curse and the broader macroeconomic and political consequences of large offshore finance sectors.\n\nSource: The True Cost of Global Tax Havens – IMF F&D (page overview)\n\n---\n\n Content in this bundle\n\n- التصدي للملاذات الضريبية\n - التصدي للملاذات الضريبية (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - التصدي للملاذات الضريبية (PDF){rel=\"external\" type=\"application/pdf\"}\n- Combatir los paraísos fiscales ● Finanzas y Desarrollo ● Septiembre de 2019\n - Combatir los paraísos fiscales ● Finanzas y Desarrollo ● Septiembre de 2019 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Combatir los paraísos fiscales ● Finanzas y Desarrollo ● Septiembre de 2019 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Haro sur les paradis fiscaux\n - Haro sur les paradis fiscaux (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Haro sur les paradis fiscaux (PDF){rel=\"external\" type=\"application/pdf\"}\n- タックスヘイブンという病巣　ニコラス・シャクソン著　ファイナンス＆ディベロップメント 2019年9月\n - タックスヘイブンという病巣　ニコラス・シャクソン著　ファイナンス＆ディベロップメント 2019年9月 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - タックスヘイブンという病巣　ニコラス・シャクソン著　ファイナンス＆ディベロップメント 2019年9月 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Борьба с налоговыми убежищами – Финансы и развитие – сентябрь 2019 года\n - Борьба с налоговыми убежищами – Финансы и развитие – сентябрь 2019 года (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Борьба с налоговыми убежищами – Финансы и развитие – сентябрь 2019 года (PDF){rel=\"external\" type=\"application/pdf\"}\n- The True Cost of Global Tax Havens – IMF F&D\n - The True Cost of Global Tax Havens – IMF F&D (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - The True Cost of Global Tax Havens – IMF F&D (PDF){rel=\"external\" type=\"application/pdf\"}\n- 应对避税港问题 - 《金融与发展》2019年9月号·第56卷·第3期 - 国际货币基金组织季刊\n - 应对避税港问题 - 《金融与发展》2019年9月号·第56卷·第3期 - 国际货币基金组织季刊 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - 应对避税港问题 - 《金融与发展》2019年9月号·第56卷·第3期 - 国际货币基金组织季刊 (PDF){rel=\"external\" type=\"application/pdf\"}\n- sdn1508\n - sdn1508 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - sdn1508 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2019/09/tackling-global-tax-havens-shaxon" } ], "bullets": [ "[Markdown version](/en/publications/fandd/issues/2019/09/tackling-global-tax-havens-shaxon/index.md)", "[Structured JSON version](/en/publications/fandd/issues/2019/09/tackling-global-tax-havens-shaxon/index.json)", "[Bundle manifest](/en/publications/fandd/issues/2019/09/tackling-global-tax-havens-shaxon/bundle-manifest.json)", "Authors: NICHOLAS SHAXSON", "Published: September 1, 2019", "Tax havens are far bigger and more central to the global economy than commonly perceived and the largest havens are often located in rich jurisdictions or their territories.", "Tax havens enable escape from taxes, financial regulations, disclosure, and criminal liability, tilting the playing field toward large financial institutions and multinationals and against small and medium enterprises.", "Political damage includes hiding places for illicit activities of elites and increased financial instability risks for emerging market economies.", "Tax havens collectively cost governments between $500 billion and $600 billion a year in lost corporate tax revenue.", "Low-income economies account for some $200 billion of that lost corporate tax revenue.", "Low-income economies’ hit as a percentage of GDP is larger than for advanced economies, and exceeds the roughly $150 billion they receive each year in foreign development assistance.", "American Fortune 500 companies alone held an estimated $2.6 trillion offshore in 2017.", "Individuals have stashed $8.7 trillion in tax havens (Gabriel Zucman, 2017 estimates).", "James S. Henry’s (2016) more comprehensive estimate yields up to $36 trillion held offshore.", "Both estimates imply global individual income tax losses at around $200 billion a year, to be added to the corporate total.", "The author’s working definition of a tax haven emphasizes “escape” and “elsewhere.”", "The international corporate tax system treats multinationals as “separate entities” under the arm’s length principle, a fiction that enables profit shifting.", "Transfer pricing manipulation example: a firm’s affiliate in a low-tax haven holds a patent and charges high royalties to affiliates in high-tax countries.", "Alternative described: “unitary tax with formulary apportionment,” which treats a multinational as a single entity and apportions profits geographically according to a formula (sales, employment, tangible assets).", "Practical and political difficulties exist for formulary apportionment, but it is presented as simpler, fairer, and more rational than current practice.", "Average corporate tax rates declined byhalf, from 49 percent in 1985 to 24 percent today.", "For US multinationals, corporate profit shifting into tax havens rose from an estimated 5 percent to 10 percent of gross profits in the 1990s to about 25 to 30 percent today.", "Offshore capital tends to drain from poor countries to rich ones.", "Research on “too much finance” indicates financial sector growth is beneficial up to an optimal point, after which it harms economic growth; most advanced economies, including major tax havens, have passed that point.", "Concept introduced: the “finance curse”—an oversize financial sector produces effects analogous to a resource curse (brain drain, inequality, higher local prices, boom-bust cycles, rent seeking, loss of entrepreneurship, and financialization).", "Post-2008 political pressure, Panama Papers and Luxembourg Leaks, and activism led to OECD initiatives:", "Political and institutional shifts in 2019:", "Incremental and data-driven steps: country-by-country reporting and publication of multinational breakdowns could provide data for international allocation formulas.", "Enforcement lesson from Switzerland: targeting private enablers (bankers, banks, accountants, lawyers) can prompt reform; effective international responses must include strong sanctions against private enablers of tax evasion and other crimes.", "Move toward unitary taxation with formulary apportionment (gradual or evolutionary implementation possible through stepping-stones such as enhanced transparency and country-by-country data).", "Strengthen sanctions and enforcement against private enablers of secrecy and evasion (accountants, lawyers, bankers).", "Use unilateral actions by jurisdictions that recognize hosting offshore financial centers is detrimental—stepping out of the race to the bottom can improve domestic well-being.", "Pursue multilateral reforms while acknowledging collective-action challenges and incentives for jurisdictions to cheat; complement cooperative approaches with measures that change domestic incentives in havens.", "Continue research into the finance curse and the broader macroeconomic and political consequences of large offshore finance sectors.", "**التصدي للملاذات الضريبية**", "**Combatir los paraísos fiscales ● Finanzas y Desarrollo ● Septiembre de 2019**", "**Haro sur les paradis fiscaux**", "**タックスヘイブンという病巣　ニコラス・シャクソン著　ファイナンス＆ディベロップメント 2019年9月**", "**Борьба с налоговыми убежищами – Финансы и развитие – сентябрь 2019 года**", "**The True Cost of Global Tax Havens – IMF F&D**", "**应对避税港问题 - 《金融与发展》2019年9月号·第56卷·第3期 - 国际货币基金组织季刊**", "**sdn1508**" ], "related": [ { "title": "التصدي للملاذات الضريبية", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2019/september/ar/shaxson.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2019/september/ar/shaxson.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2019/september/ar/shaxson.pdf", "mime": "application/pdf" } }, { "title": "Combatir los paraísos fiscales ● Finanzas y Desarrollo ● Septiembre de 2019", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2019/september/es/tackling-global-tax-havens-shaxon.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2019/september/es/tackling-global-tax-havens-shaxon.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2019/september/es/tackling-global-tax-havens-shaxon.pdf", "mime": "application/pdf" } }, { "title": "Haro sur les paradis fiscaux", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2019/september/fr/tackling-global-tax-havens-shaxon.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2019/september/fr/tackling-global-tax-havens-shaxon.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2019/september/fr/tackling-global-tax-havens-shaxon.pdf", "mime": "application/pdf" } }, { "title": "タックスヘイブンという病巣　ニコラス・シャクソン著　ファイナンス＆ディベロップメント 2019年9月", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2019/september/jp/shaxson.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2019/september/jp/shaxson.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2019/september/jp/shaxson.pdf", "mime": "application/pdf" } }, { "title": "Борьба с налоговыми убежищами – Финансы и развитие – сентябрь 2019 года", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2019/september/ru/tackling-global-tax-havens-shaxon.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2019/september/ru/tackling-global-tax-havens-shaxon.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2019/september/ru/tackling-global-tax-havens-shaxon.pdf", "mime": "application/pdf" } }, { "title": "The True Cost of Global Tax Havens – IMF F&D", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2019/september/tackling-global-tax-havens-shaxon.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2019/september/tackling-global-tax-havens-shaxon.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2019/september/tackling-global-tax-havens-shaxon.pdf", "mime": "application/pdf" } }, { "title": "应对避税港问题 - 《金融与发展》2019年9月号·第56卷·第3期 - 国际货币基金组织季刊", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2019/september/zh/tackling-global-tax-havens-shaxon.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2019/september/zh/tackling-global-tax-havens-shaxon.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2019/september/zh/tackling-global-tax-havens-shaxon.pdf", "mime": "application/pdf" } }, { "title": "sdn1508", "role": "note", "sourceUrl": "https://www.imf.org/external/pubs/ft/sdn/2015/sdn1508.pdf", "summary": { "path": "/external/pubs/ft/sdn/2015/sdn1508.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/external/pubs/ft/sdn/2015/sdn1508.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/publications/fandd/issues/2019/09/tackling-global-tax-havens-shaxon/index.md", "json": "/en/publications/fandd/issues/2019/09/tackling-global-tax-havens-shaxon/index.json", "bundleManifest": "/en/publications/fandd/issues/2019/09/tackling-global-tax-havens-shaxon/bundle-manifest.json" }, "generatedAtUtc": "2026-09-15T05:12:35.570Z" }