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 journalArticleAcademicpeer-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 languageEnglish
Pages (from-to)690-706
Number of pages17
JournalNew Political Economy
Volume26
Issue number4
DOIs
Publication statusPublished - 2021

Keywords

  • accountancy firms
  • Big Four
  • corporate structures
  • Global wealth chains
  • tax avoidance

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