Apocalypse and tax havens

I

In one year alone (2016), multinational corporations (MNCs) were estimated to have shifted USD 1 trillion of profits to tax havens, with an estimated USD 200-300 billion in lost tax revenue worldwide. (The Cayman Islands, Luxembourg, Bermuda, Hong Kong and the Netherlands are among the most important tax havens.) Another study estimates multinational enterprises shift close to 40% of their profits to tax havens globally. As for regions, the main European banks are reckoned to have booked EUR 20 billion (close to 15% of their total profits) in tax havens. In Germany, by way of one country, MNCs there are said to have shifted corporate profits of some EUR 19 billion to tax havens, with an estimated tax revenue loss of roughly EUR 5.7 billion.

Assume now the Climate Emergency intervenes as apocalypse. The Cayman Islands, Bermuda, Hong Kong and the Netherlands? Under water. MNCs? They should be so lucky! Tax havens and forgone tax revenues? After the apocalypse, what taxes?

II

These points bode forth an interesting set of policy issues. In particular, why ever, it seems, are we spending time and resources on reducing the use of tax havens when all our energies—all our political will—should be directed to averting the climate-induced apocalypse? Indeed, today’s tax havens are visibly part of the opportunity costs of deadly climate inaction. Reducing tax havens is worse than meaningless unless the generated revenues are directed to mitigating the impacts of climate change–and even then it could be too little too late.

Or is it too little too late in quite another sense? For surely part of being in the apocalypse means we have to manage the Climate Emergency far better everywhere than we (can) manage tax havens here or there, and now. . .

Unless, of course, you are among the many who imagine that getting rid of these tax sinkholes for the rich and already-undeserving is already among the few things that are truly urgent.

Principal sources

Aliprandi, G., M. Baraké, and P-E Chouc (2021). Have European Banks Left Tax Havens? Evidence from country-by-country data (Report 2). The EU Tax Observatory. Paris School of Economics.

Ciuriak, D. and A.J. Eurallyah (2021). Taxing Capital In The Age Of Intangibles. Discussion Paper, Ciuriak Consulting. (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3920763)

Fuest, C., F. Hugger, and F. Neumeier (2021). Corporate Profit Shifting and the Role of Tax Havens: Evidence from German Country-By-Country Reporting Data. CESifo Working Paper No. 8838. Munich Society for the Promotion of Economic Research, Munich.

Garcia-Bernardo, J., and P. Janský (2021). Profit Shifting of Multinational Corporations Worldwide. ICTD Working Paper 119, Institute of Development Studies, Brighton UK.