The extent of tax haven use and its consequences

The use of tax havens by individuals and companies undermines democracy, facilitates corruption and increases inequality. But we still have little research-based knowledge about the extent and consequences of the use of tax havens. In this project, we will contribute to a deeper insight into the size and distribution of hidden forms, to what are the underlying drivers behind such behavior and to who benefits from the companies' profit shifting with the help of tax havens. For a long time, little was known about how the extent of hidden assets in tax havens. This started to change about 10 years ago, when new statistics, a series of leaks and subsequent research shed light on this very thing. The leading estimates are now that assets worth around 10 percent of the world's total GDP are hidden in tax havens. But this estimate only covers financial assets, i.e. shares, bonds, funds and deposits in bank accounts. We are working on what remains: putting numbers on how large fortunes are hidden in property in tax havens and on who owns these assets. Through a unique collaboration with international journalists, we have gained access to leaked data on the property market in Dubai, a closed and secretive tax haven. We estimate that property worth at least 146 billion dollars, over a quarter of the total value of property in Dubai, is owned by foreigners, and we also estimate which countries own this properties. Norwegians own property in Dubai worth around NOK 1 billion in total, but only around 30 per cent of the properties where the owner was liable to tax in Norway were reported to the Norwegian tax authorities in 2019, which points to widespread tax evasion. As part of extensive dissemination work, we have collaborated with the EU Tax Observatory and NORAD in establishing a new website that easily conveys these insights to the general public: https://atlas-offshore.world/ and also evaluated these and other results in the innovative report "Global Tax Evasion Report 2024" which received extensive media coverage worldwide. As an extension of this, we examine how much of Norwegian property is owned from abroad. We find that foreign companies and individuals own two percent of Norwegian property, measured in value. This share increases to 10 percent when we only look at property owned through companies. There is an increasing focus on multinational companies' profit shifting. In this project, we investigate how profit shifting is linked to wage inequality and find that the employees also benefit from the fact that the companies they work for reduce their taxes by shifting profits from Norway to abroad, but that this gain mostly comes at the top, among those who already have high salary.

This project sets aim to push the research frontier on the uses of tax havens and their consequences. The mainly empirical work will span both major tax havens and their connections to Norway and other countries. The first part of the project sets out to continue the evolving work on mapping the size and distribution of offshore wealth. First, we will fill a key gap in the study of tax havens today—namely the size of offshore real assets as opposed to offshore financial assets. Then, we will shed new light on the distribution of offshore wealth. In turn, we will contribute to pushing forward knowledge about the level and rise of wealth concentration, one of the most important questions in the social sciences today. Contrasting the size of offshore real estate to the size of offshore financial assets will allow us to shed light on a potential blind-spot of current efforts aimed at reducing tax evasion, namely the fact that the automatic exchange of information across countries currently does not include real estate. In turn this could contribute to better policy in this important area of international cooperation. The second part of the project sets out to investigate what drives offshore capital flows and who within a country actually transfers money to and from tax havens. We will provide novel insights into the dynamic and drivers of capital flight, both through the emigration of the wealthy and through bank transactions. We will estimate the tax base erosion due to where wealthy individuals choose to live and where they choose to invest their money. We will also investigate firms’ behaviour, looking at firms’ exposure to tax havens, using a little used measure, and compare this to key variables. This will enable us to significantly advance the frontier of our knowledge of the consequences of profit shifting in Norway and provide lessons that may extend to other nations involved in the BEPS process.