In global trade, cash flows are hidden to ensure maximum profits. Many developing countries end up as losers in the fight over revenues.
(Photo: The British Virgin Islands are a paradise in two senses: a Caribbean gem with a population of 27,000 and a tax haven for one million international companies. (Photo: Shutterstock))
When capital moves across national borders, it also crosses a legal and regulatory no-man’s land. Different countries have different tax rules and only exchange information to a limited extent. Global companies with operations in many countries take advantage of this situation. With the help of tax havens and powerful international banks and law firms, revenues disappear as if by magic. Capital is redirected in order to minimise taxes and optimise the companies’ profits and competitiveness.
‘Such cash flows are often called global wealth chains,’ says Leonard Seabrooke, Professor of International Political Economy at Copenhagen Business School in Denmark. He is project manager for a group of 14 researchers from a number of countries. They're currently mapping how capital moves across national borders in international trade. The research project has been given the name STEAL (Systems of Tax Evasion and Laundering: Locating Global Wealth Chains in the International Political Economy).
How global wealth chains arise and function are key issues in STEAL, which is being conducted by the Norwegian Institute of International Affairs (NUPI). The Research Council of Norway has allocated NOK 6.4 million to the project over four years. Project manager Seabrooke says there is a great need for more knowledge about how capital moves across national borders in today’s globalised economy.
To read the full press release from the Norwegian Research Council, please click here.