Taxing across Borders: Tracking Personal Wealth and Corporate Profits

TLDR

Profit shifting to tax havens and offshore wealth are rising despite ambitious policy initiatives. The article estimates the magnitude of corporate tax avoidance and personal tax evasion through offshore tax havens and proposes that creating a world financial registry is the key solution. The author discusses recent proposals to curb tax avoidance and evasion, advocating a global financial registry. US corporations now book 20 % of profits in tax havens—a tenfold increase since the 1980s—driving effective tax rates down from 30 % to 20 %, with two‑thirds of the decline due to international avoidance, while globally 8 % of personal wealth is offshore, costing governments over $200 billion annually.

Abstract

This article attempts to estimate the magnitude of corporate tax avoidance and personal tax evasion through offshore tax havens. US corporations book 20 percent of their profits in tax havens, a tenfold increase since the 1980; their effective tax rate has declined from 30 to 20 percent over the last 15 years, and about two-thirds of this decline can be attributed to increased international tax avoidance. Globally, 8 percent of the world's personal financial wealth is held offshore, costing more than $200 billion to governments every year. Despite ambitious policy initiatives, profit shifting to tax havens and offshore wealth are rising. I discuss the recent proposals made to address these issues, and I argue that the main objective should be to create a world financial registry.