Tax havens, Tax flight and Tax avoidance by Silke Ottch

TAX HAVENS, TAX FLIGHT AND TAX AVOIDANCE Facts, Consequences and Measures By Silke Otsch [This study is translated abridged from the German on the Internet, www.academia.edu.] Summary States have lost considerable sums through tax flight and tax avoidance. A parallel legal system has arisen that the privileged systematically exploit. Despite its relevance, sociology has hardly focused on this theme. This study gives a survey on this theme and discusses the state of regulations and prospects of success. Based on interdisciplinary academic research on tax flight and tax avoidance, publications of international organizations and NGOs and analyses of politics, this study describes the following facets: 1. The institutionalization of the offshore economy; 2. The terms of the offshore economy; 3. Techniques of tax flight and tax avoidance; 4. Profiteers, losers, and consequences of tax flight and avoidance; 5. Political-technical measures of tax flight and avoidance and 6. Social causes of offshore practices and possible actions. Institutions of the offshore economy arose out of the systematic actions of elites and not only by exploiting structural conditions or national legal frameworks by international economic actors. Politics is now passing over from a primarily symbolic to a stronger substantial regulation after the offshore economy was formed over decades. However, retraction of this regulation and a relapse into location competition is a possible scenario because structural forces like institutionalizing competition in the framework of the European Union, increasing inequality, problems of regulation, complex systems, path dependencies, asymmetrical power relations, gaps in regulation and long-term interests of elites counteract regulation. Purely technical regulatory approaches are not enough. Combating the offshore economy has better chances as a broader social project. Tax havens, tax flight and tax avoidance – described as the offshore economy – are a form of a parallel economy or a parallel legal system in taxation that grants advantages to multinational corporations and rich private persons. Since the 1970s, countries introduced increasing offshore legislation and institutionalized the parallel economy. After tax havens, tax flight and tax avoidance were tolerated for decades, institutions are now put in question – following some data leaks, investigating commissions and increased pressure burdening the public sector.