The Wealth Defence Industry: A Large-scale Study on Accountancy Firms as Profit Shifting Facilitators

Lena Ajdacic; Eelke M. Heemskerk; Javier Garcia-Bernardo

doi:10.1080/13563467.2020.1816947

The Wealth Defence Industry: A Large-scale Study on Accountancy Firms as Profit Shifting Facilitators

Lena Ajdacic^*, Eelke M. Heemskerk, Javier Garcia-Bernardo

^*Corresponding author for this work

Research output: Contribution to journal › Article › Academic › peer-review

Abstract

Corporations increasingly engage in innovative ‘tax planning strategies’ by shifting profits between jurisdictions. In response, states try to curtail such profit shifting activities while at the same time attempting to retain and attract multinational corporations. We aim to open up this dichotomy between states and corporations and argue that a wealth defence industry of professional service firms plays a crucial role as facilitators. We investigate the subsidiary structure of 27,000 MNCs and show that clients of the Big Four accountancy firms show systematically higher levels of aggressive tax planning strategies than clients of smaller accountancy firms. We specify this effect for three distinct strategies and also uncover marked differences across countries. As such we provide empirical evidence for the systematic involvement of auditors as facilitators in corporate wealth defence.

Original language	English
Pages (from-to)	690-706
Number of pages	17
Journal	New Political Economy
Volume	26
Issue number	4
DOIs	https://doi.org/10.1080/13563467.2020.1816947
Publication status	Published - 2021
Externally published	Yes

Bibliographical note

Funding Information:
This project has received funding from the European Research Council (ERC) under the European Union's Horizon 2020 research and innovation program (grant agreement number 638946). We are grateful to Luc Fransen, Milan Babic, Diliara Valeeva, Frank Takes, Arjan Reurink, Jouke Huijzer and Vladeta Ajdacic for their comments on earlier versions.

Publisher Copyright:
© 2020 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.

Funding

This project has received funding from the European Research Council (ERC) under the European Union's Horizon 2020 research and innovation program (grant agreement number 638946). We are grateful to Luc Fransen, Milan Babic, Diliara Valeeva, Frank Takes, Arjan Reurink, Jouke Huijzer and Vladeta Ajdacic for their comments on earlier versions.

Keywords

accountancy firms
Big Four
corporate structures
Global wealth chains
tax avoidance

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10.1080/13563467.2020.1816947

Cite this

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abstract = "Corporations increasingly engage in innovative {\textquoteleft}tax planning strategies{\textquoteright} by shifting profits between jurisdictions. In response, states try to curtail such profit shifting activities while at the same time attempting to retain and attract multinational corporations. We aim to open up this dichotomy between states and corporations and argue that a wealth defence industry of professional service firms plays a crucial role as facilitators. We investigate the subsidiary structure of 27,000 MNCs and show that clients of the Big Four accountancy firms show systematically higher levels of aggressive tax planning strategies than clients of smaller accountancy firms. We specify this effect for three distinct strategies and also uncover marked differences across countries. As such we provide empirical evidence for the systematic involvement of auditors as facilitators in corporate wealth defence.",

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N1 - Funding Information: This project has received funding from the European Research Council (ERC) under the European Union's Horizon 2020 research and innovation program (grant agreement number 638946). We are grateful to Luc Fransen, Milan Babic, Diliara Valeeva, Frank Takes, Arjan Reurink, Jouke Huijzer and Vladeta Ajdacic for their comments on earlier versions. Publisher Copyright: © 2020 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.

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The Wealth Defence Industry: A Large-scale Study on Accountancy Firms as Profit Shifting Facilitators

Abstract

Bibliographical note

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Keywords

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