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2 Jun 2015 11:21am

Use of tax havens is falling

One in six of the world’s largest companies have a subsidiary based in a tax haven

According to research from Morgan Stanley Capital International (MSCI), 16.3% of the 1,612 companies in its MSCI World index are either domiciled in a tax haven or have at least one majority-owned subsidiary in one.

The Cayman Islands, Hong Kong, Luxembourg, Switzerland and Singapore were identified as the most common locations.

However, the number of companies with a wholly owned tax haven-based subsidiary has actually fallen from 10.8% to 7.1% in the past two years.

MSCI has defined “high tax gap companies” as companies with a 10 percentage point or greater gap between their expected tax rate (based on where revenues are generated) and actual tax rate paid.

In the last two years MSCI identified 243 out of the 1,093 relevant companies as having a “large tax gap”, paying an average rate of 17.7%, versus 34.0%, if these companies were paying taxes in the jurisdictions where they generate revenues.

These 243 companies would have paid in aggregate an estimated $82bn (£53.7bn) per year in taxes, had these companies been paying taxes at the same rate as their peers.

Despite the raft of derogatory headlines for the likes of Google and Apple in recent years, the IT sector is not the leading sector in paying lower taxes.

The healthcare sector ranks the highest, with 37% meeting the high tax gap criteria. Energy and Materials companies follow closely behind the IT sector, with one in every four.

Raymond Doherty

 

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