Mapping the global geography of shell companies

This note examines the global prevalence and distribution of shell companies, which are often used for illicit financial activities like tax evasion. Using business registry data for over 200 jurisdictions, including individual US states, we construct an indicator of shell company prevalence based on the number of registered companies per capita. We find that known tax havens like the British Virgin Islands and the Cayman Islands have extremely high rates of company presence per adult. Zooming in on Europe reveals Estonia as a lesser-known host for shell companies, besides flagging known conduit countries like Luxembourg and Cyprus. A unique decomposition of US states also shows Delaware and Wyoming are potentially hosting a large number of shell companies. Indicative for the role of shell companies in international tax evasion, our shell company prevalence indicator correlates with jurisdiction characteristics catering tax evasion, such as low corporate tax rate and aggressive tax treaties.

Tax Transparency by Multinationals: Trends in Country-by-Country Reports Public Disclosure

Country-by-Country Reporting is a key data source for understanding the activities of multinational firms. This note explores public Country-by-Country Reports (CbCRs) published by multinational companies to highlight several important trends. First, while only a small number of large multinationals currently publish their CbCRs, the number of companies is increasing rapidly for both large and smaller multinational firms. However, these reports are scattered across different sets of documents, making collecting and analysing them challenging. Second, CbCR publishing is driven by European companies, especially companies active in the extractive sector. Finally, published reports are generally not complete in terms of variables included but present a satisfactory geographical disaggregation in most cases.

A Modern Excess Profit Tax

This note presents a new way to tax excess profits. We propose to tax the rise in the stock market capitalization of companies that benefit from extraordinary circumstances, such as energy firms following the invasion of Ukraine in February 2022. Targeting the rise in stock market capitalization (which is easily observable) makes the tax much harder to avoid than standard excess profit taxes, and allows to capture rents irrespective of where multinational companies book their profits. We apply this proposal to energy companies that are headquartered or have sales in the European Union. We estimate that taxing the January 2022 to September 2022 valuation gains of energy firms at a rate of 33% would generate around €65 billion in revenue (0.3% of GDP) for the European Union. We discuss implementation practicalities and compare our proposals to other plans made to tax excess profits.

Effective sanctions against oligarchs and the role of a European Asset Registry

This note provides data on wealth inequality in Russia and advocates for a European Asset Registry. Russia exhibits the highest wealth inequality in Europe. Further, Russia’s wealthiest nationals conceal a large share of their wealth through tax havens. The current architecture of the global financial system impedes comprehensive knowledge on beneficial ownership across asset types and jurisdictions.

Under the roof of a European Asset Registry, the already existing but currently dispersed information could be gathered. This would change the state of play, resulting in better-targeted sanctions and effective tools to curb money laundering, corruption and tax evasion.

The European Union could have a pioneering role in taking the next step towards more financial transparency.