Given the impact that the recent financial crisis of 2008 has had on the public finances of developed economies, the use of tax avoidance measures by multinational enterprises has come under increased scrutiny from various governments and civil society organisations across the world.
High profile cases, such as the tax affairs of Amazon, Facebook and Google have received widespread media attention. It is well known that the ‘Big 4’ accountancy firms Deloitte, EY, KPMG and PwC, play an important role not only in the accounting services they provide for global multinationals, but in the wider provision of financial services ranging from tax advice to company formation.
Dr Yama Temouri, Associate Professor at the University of Wollongong in Dubai (UOWD) and colleagues, Dr Chris Jones from Aston University and Alex Cobham from the Tax Justice Network undertook a groundbreaking study, collating the tax haven activity of 5,912 multinational enterprises over the period 2005-2013.
Their study, investigates the association between the Big 4 accountancy firms and the extent to which multinational enterprises build, manage and maintain their networks of tax haven subsidiaries.
“A staggering estimated figure of $130 billion a year is expected to flow secretly into tax havens by multinational enterprises” commented Dr Temouri.
“The key findings of our study demonstrate that there is a strong correlation and causal link between the size of a multinational’s tax haven network and their use of the Big 4. This result means that public policy related to the role of auditors can have a significant impact on the tax avoidance behaviour of multinational enterprises”, he added.
This timely and important study has been recently accepted for publication by the Journal of World Business, which is a leading international academic journal. Their earlier two research projects on tax havens has also received significant attention in the academic sphere by receiving numerous best paper prizes and from the international media which has covered their work. One of the projects examined the determinants of a multinational’s decision to set up tax haven subsidiaries. Another project sheds light on how tax haven activity by multinationals impacts on their economic dynamism and efficiency at home.
It is on the back of this success that Dr Yama Temouri and colleagues have now won a large external grant from the Leverhulme Trust in the UK worth £121,590 (AED 598,310) over 24 months. The research project is entitled “Tax Havens and Emerging Market Multinational Enterprises” and will shed light on the various dimensions of tax haven activity by emerging country multinationals.
The project is highly relevant to the current policy landscape in terms of corporate tax reform and the international business literature. The project is expected to generate four papers for publication in leading international business journals