The determinants of portfolio investment in offshore financial centers

An offshore financial center (OFC) is generally defined as a jurisdiction in which the financial sector is disproportionately larger than the domestic economy. We examine what national level push factors determine a country's investment in OFCs using a panel data set covering 78 source countries investing in over 200 foreign jurisdictions. OFCs are defined using an existing method based on institutional characteristics and fiscal policies as well as with a novel data-driven method based on actual financial positions relative to GDP. We find that OFC investment is driven by various aspects of low profitability in the source country. Source country factors such as inefficient labor markets, weak infrastructure, and competitive markets drive investments toward OFCs. These factors have an even larger impact on OFC investment than corporate tax rates in the source country. This suggests that a country seeking to reduce utilization of OFC's should focus on policies like improving domestic infrastructure and the efficiency of labor markets.     

South Pacific tax havens: From leaders in the race to the bottom to laggards in the race to the top?

This paper examines the fortunes of South Pacific tax havens in light of recent international campaigns to raise minimum regulatory standards. The paper is structured around three puzzles. The first is that although offshore sectors have generated meagre returns and are now associated with rising costs, this has not prevented existing players mounting a spirited defence of their offshore sectors. Secondly, although Pacific islands states would seem to be highly vulnerable to international pressure, they have also been the most recalcitrant in response to international regulatory initiatives. The third puzzle is that although onshore countries and international organisations bemoan the negative consequences of Pacific tax havens, they have been unwilling to offer the tiny sums necessary to buy out these offshore centres.     

Statement of the Financial Economists Roundtable: Corporate Tax Reform

Corporate tax reform has been a controversial issue in the U.S. for several years, particularly as U.S. companies have accumulated cash in lower‐tax overseas subsidiaries, while some have used “inversions” to establish overseas corporate domiciles. Two features of U.S. corporate taxation stand out: 1. U.S. corporate income tax rates are the highest in the industrialized world. The federal rate is 35%; and, when combined with state taxes, it averages 39%, as compared to an OECD average of 24%. 2. U.S. corporations pay U.S. tax on their worldwide income, but can choose to avoid indefinitely corporate tax on foreign profits by not repatriating them. Neither feature is present in most other Western countries, where the norm is a “territorial” system that taxes companies only on their domestic profits. The Trump administration has proposed to cut U.S. corporate tax rates to 20%, thereby bringing them down to the OECD average, and to adopt a territorial tax regime like those found in most other Western nations. In this statement signed by 31 senior financial economists, the authors recommend cutting U.S. corporate tax rates, but retaining the current system of taxing the worldwide profits of U.S. companies (while giving them credit for taxes paid in overseas jurisdictions). Once U.S. rates drop to the international average, the economists point out, U.S. companies would have much less incentive under the worldwide system to use transfer pricing schemes to shift their profits to low‐tax jurisdictions than under the proposed territorial alternative. Indeed, under the current system, if the lower rates under consideration are enacted, the location of a company's business activity (including the firm's underlying intellectual property) would not affect its taxation. Along with lower corporate tax rates, the economists also recommend that Congress limit or remove the corporate option to defer the taxation of offshore profits and provide a schedule for repatriating off‐shore funds, using the inducement of the now lower rates as well as the possibility of a “tax holiday.”     

Offshore operations and bank loan contracting: Evidence from firms that set up subsidiaries in offshore financial centers

We examine the effects of a multinational firm's subsidiary operations in offshore financial centers (OFCs) on bank loan contracting terms. Using a propensity score matched cross-country sample of firms with and without OFC subsidiaries, we find that firms with OFC subsidiaries receive less favorable loan terms than firms without OFC subsidiaries. The results from a difference-in-differences analysis and an analysis of a firm's mutation from a non-OFC firm to an OFC firm support the causal effect of offshore operations on the unfavorable loan terms. Furthermore, focusing on firms with OFC subsidiaries, we find that the intensity of offshore operations affects loan terms unfavorably. We also find that the unfavorable effect is more pronounced for more opaque firms and for firms that are headquartered in countries or jurisdictions with weaker legal enforcement. Our findings indicate that banks view offshore operations of borrowers as a credit risk-increasing factor.     

论国际税收竞争的法律调节

国际税收竞争正在成为经济全球化时代各国最大化本国经济利益的重要方式,它具有广泛的域外负外部效应,需要国际法规范予以调节.随着经济全球化的推进,wTO将成为调节国际税收政策的主要机构.我们必须降低现行企业所得税税率,以应对外国的税收竞争政策,同时,应成立专门工作小组,就国际税收竞争对我国的影响进行理论分析与实证研究,为我国参与wTO关于国际税收竞争问题的谈判提供政策建议.     

Using Financial Accounting Data to Examine the Effect of Foreign Operations Located in Tax Havens and Other Countries on U.S. Multinational Firms' Tax Rates

This paper investigates the effect tax havens and other foreign jurisdictions have on the income tax rates of multinational firms based in the United States. We develop a new regression methodology using financial accounting data to estimate the average worldwide, federal, and foreign tax rates on worldwide, federal, and foreign pretax book income for a large sample of U.S. firms with and without tax haven operations. We find that on average U.S. firms that disclosed material operations in at least one tax haven country have a worldwide tax burden on worldwide income that is approximately 1.5 percentage points lower than firms without operations in at least one tax haven country. Our results also show that U.S. firms face a 4.4% current federal tax rate on foreign income whether or not they have tax haven operations. Finally, we find that U.S. firms with operations in some tax haven countries have higher federal tax rates on foreign income than other firms. This result suggests that in some cases, tax haven operations may increase U.S. tax collections at the expense of foreign country tax collections.     

离岸市场对货币主权国金融市场的影响分析——基于亚洲美元市场的实证研究

离岸金融市场受益于税收优惠及高度自由化的政策环境,近年来规模不断扩大,在国际金融市场上的重要性逐步提升。与此同时,离岸市场资金短借长贷的特点也使得国际金融市场变得更加脆弱。本文利用亚洲美元市场数据,运用计量模型就离岸市场对货币主权国金融市场的冲击进行了实证分析。研究表明,在离岸金融市场繁荣发展阶段,离岸市场的波动对货币主权国的冲击影响比较大,此阶段应是监管部门风险调控的关键时期。     

Beyond Tax Avoidance: Offshore Firms’ Institutional Environment and Financial Reporting Quality*

We explore how firms’ operations in Offshore Financial Centers (OFCs) through subsidiaries or affiliates affect the quality of financial reporting. Using a unique and large sample of firms that have headquarters in the 15 countries with the strictest legal regimes and have subsidiaries or affiliates in OFCs, we find that such firms exhibit lower financial reporting quality than comparable firms without OFC operations. We also find that as OFC characteristics become more prevalent, firms are more likely to engage in both accrual‐based and real earnings management. More importantly, after disentangling OFC characteristics into the opportunity for tax avoidance, regulation arbitrage and secrecy policies, we find that beyond tax avoidance, regulation arbitrage and the secrecy policies of OFCs significantly affect financial reporting quality. The causal effect of OFC operations is supported by the analysis of financial reporting quality when firms set up OFC operations. Our findings are robust to various additional tests addressing potential endogeneity issues. We conclude that the assessment of a firm's institutional environment must encompass the registration status of its subsidiaries or affiliates as well as its own.     

全球金融服务外包产业发展最新趋势及中国策略

经济危机使全球服务外包产业深受影响。规模最大、发展最快的金融服务外包领域出现巨额合同交易显著减少、辅助性后台外包需求加快释放、国际金融机构海外自营中心外部化以及部分发展中国家和新兴市场出现反向式增长等新趋势。经济衰退背景下,国际金融机构加快业务转移和重组趋势明显,对外开放和竞争加剧也将加快释放国内金融机构的外包需求,跨国服务商的示范作用有利于本土服务商迅速提高综合竞争力加之中国具有的多种竞争优势,后危机时代有望支持其成长为新的全球金融服务外包中心。为加快产业发展,应在全面培育市场主体和积极改善外部环境等方面做出更多努力。     

行业类别与增值税纳税义务人选择: 来自中小企业的经验证据

从国际比较上看，无论发达国家、新兴工业国家，还是发展中国家，都存在大量且在经济发展中扮演了重要角色的中小企业，研究中小企业财务报告的行为特征十分必要。本文通过对中小企业的行业类别与增值税纳税义务人选择行为进行实证分析后发现，税收法规是影响中小企业会计政策选择的关键因素；减低税负是规范中小企业财务报告行为的有效途径之一。     

Tax risk management and the multinational enterprise

The financial scandals in the United States and other countries ushered in financial reporting and corporate governance reforms that extend beyond the U.S. Sarbanes-Oxley Act of 2002 (SOX). These initiatives have increased the international financial community's awareness of the importance of risk management and internal controls. Tax risk management and related internal controls have been accorded less focus than risk management generally. The purpose of this research is to describe the current state of tax risk management of multinational enterprises (MNEs) by reporting survey responses from chief financial officers (CFOs) of U.S. and non-U.S. MNEs. The research shows that significant progress has been made by large MNEs in developing and implementing both general and tax risk management policies. The results provide guidance in identifying the loci and impact of organizational tax risk and indicate that respondents do not perceive alarming degrees of tax risk in their organizations. The study reveals a remarkable degree of similarity in U.S. and foreign firm responses and demonstrates, unexpectedly, that existing reporting structures enable CFOs to shift a significant degree of tax risk management to heads of tax.     

碳税边境调整的起因及主要争议

气候变化是当今国际社会普遍关注的全球性问题,碳税一直被认为是有效应对气候变化的经济手段,但单边征收碳税会损害本国产业的国际竞争力。碳税边境调整制度是目前解决竞争力丧失问题的最有效的国际协调方法。由于WTO规则与气候变化多边体制之间存在冲突,碳税边境调整在协调二氧化碳排放和贸易自由化方面存在着一些争议,故本文在分析现有争议的基础上提出进一步完善碳税边境调整制度的建议。     

香港离岸金融发展对大陆金融深化的效应——基于离岸金融中心的实证研究

通过构建离岸金融中心对周边国家(地区)的金融效应模型,并经推导发现,离岸金融中心发展短期内会引发离岸金融中心和周边国家(地区)金融机构之间的竞争,长期内则会强化周边国家(地区)的金融深化。本文综合香港和大陆相关样本数据的实证研究证明,短期内香港离岸金融中心发展不会促进中国大陆的金融深化,只会推动中国大陆的资本开放;长期内香港离岸金融中心发展则对中国大陆金融深化却存在正面效应,香港离岸金融中心发展与中国大陆金融深化之间具有兼容性。本文最后提出对策性建议。     

Transparency and Tax Evasion: Evidence from the Foreign Account Tax Compliance Act (FATCA)

We examine how U.S. individuals respond to regulation intended to reduce offshore tax evasion. The Foreign Account Tax Compliance Act (FATCA) requires foreign financial institutions to report information to the U.S. government regarding U.S. account holders. We first document an average $7.8 billion to $15.3 billion decrease in equity foreign portfolio investment to the United States from tax-haven countries after FATCA implementation, consistent with a decrease in “round-tripping” investments attributable to U.S. investors’ offshore tax evasion. When testing total worldwide investment out of financial accounts in tax havens post-FATCA, we find an average decline of $56.6 billion to $78.0 billion. We next provide evidence of other important consequences of this regulation, including increased expatriations of U.S. citizens and greater investment in alternative assets not subject to FATCA reporting, such as residential real estate and artwork. Our study contributes to both the academic literature and policy analysis on regulation, tax evasion, and crime.     

Tax and the Crisis*

Did taxation play any role in precipitating the financial crisis? Are there lessons to be drawn for future tax reform priorities? This paper reviews the main channels by which tax effects might have been felt and which may require forceful attention. These include in particular the large tax biases favouring debt finance and, in some countries, investment in housing. The complexities of national tax codes, and the international interaction between them, have, moreover, encouraged the use of complicated financial instruments and international tax planning, reducing transparency. Tax distortions did not cause the crisis – in the sense that there are no obvious tax changes likely to have triggered it – but they may well have contributed by leading to higher leverage and more complexity than would otherwise have been the case. Most of these distortions have long been a source of concern, but dealing with them may be more important than previously supposed.     

Protectionism and international banking : Sectorial efficiency, competitive structure and National policy

This paper deals with barriers to trade in services. More specifically, the paper deals with competition and its absence in the provision of international intermediation services by banks. Section 2 of the paper examines the substitutability of international trade and FDI (foreign direct investment) in the services sector as a basis for international competition. It also considers the overlap between commercial policy measures and regulations governing the entry and operations of foreign affiliates. Section 3 describes the types of restrictions imposed on foreign banks and evaluates their effects. Existing practices in some countries are outlined in the fourth section. The countries are the U.S., the U.K., Switzerland, Australia, Brazil and Taiwan. Section 5 evaluates competitive conditions in offshore banking centers, and compares them with conditions in onshore markets. The last section evaluates the costs and the benefits of an ‘open’ (free-trade) banking system. Such a system will tend to improve world welfare as well as the welfare of those countries who have a comparative advantage in international banking. The results are not clear with regard to the countries who have a comparative disadvantage in banking.     

税收竞争和税收套利对国际税收制度的挑战

当前被动投资的税收竞争、主动投资的税收竞争和税收套利等问题阻碍了单一税收原则和受惠原则的实践运用。本文介绍了税收竞争和税收套利对国际税收制度的挑战,并以OECD成员国的应对为例,阐述了OECD成员国不断与时俱进修订税收法规的历程,试图引起人们关注国际税收制度的完善。     

Financial services in an increasingly integrated global financial market

This paper discusses aspects of global financial services. As part of financial globalisation, financial institutions have evolved both nationally and internationally. FDI is becoming an important vehicle for multinational banks to enter developing countries. This in turn is changing the composition of trade in financial services. The experience of regional integration in Europe and the emergence of large multinational European banks signal a new era of global competition and consolidation of financial institutions. Home bias in international financial services is much less where financial integration is taking place. With financial globalisation, one should expect more diversification of ownership of multinational banks around the world, particularly when China and India are now able to have strategic investment in some of the key investment banks around the world. Financial globalisation requires stronger and more effective international institutions as a way of monitoring the activities of multinational financial institutions at both the national and international levels.     

关于进一步完善结构性减税政策的研究

由美国次贷危机引发的国际金融危机,不仅冲击了许多发达国家,而且波及广大发展中国家,我国同样遭受影响。为应对这场金融危机,我国实施了积极的财政政策和适度宽松的货币政策,取得了良好的效果。本文着重分析我国应对金融危机的结构性减税政策,说明了实施结构性减税政策的原因,介绍了结构性减税政策的内容,总结了结构性减税政策实施的成效与存在的问题,提出了进一步完善结构性减税政策的建议。     

金融市场发展中的税收立法选择——以税收对金融市场的调控功能为核心

次贷危机的发生引起世界对金融创新风险的广泛关注。为应对这次危机,税收作为财政政策工具,为各国普遍采用。但对适用于金融交易本身的税法规则,各国却未能进行深刻的反思。为促进本国金融市场发展而不断调低对金融交易的税收负担,必须经由比例原则和纳税人权利的审查而获得合理正当化的基础。减轻金融交易的税收负担对促进金融市场健康、稳定、有序发展的作用极为有限,反而在一定程度上削弱了公民权利实现的财政基础。随着金融市场从国民经济的核心演化为投机场所,各国对其课以低税负甚至免税缺乏必要的正当性。因此,对金融市场课税,应当重视的不只是其对金融市场发展的调节功能,而更应当关注税收所固有的财政收入功能,并以此为基础,遵循量能课税原则着手金融交易课税规则的构建。