# Uncovering Offshore Financial Centers: Conduits and Sinks in the Global Corporate Ownership Network

## TL;DR

This paper presents a data-driven method to identify Offshore Financial Centers (OFCs) by analyzing a vast global corporate ownership network, revealing key sink and conduit OFCs, many of which are highly developed countries.

## Contribution

A novel approach utilizing large-scale firm ownership data to distinguish sink and conduit OFCs, providing detailed insights into their roles and characteristics.

## Key findings

- Identified 24 sink-OFCs worldwide.
- Five countries dominate as conduit-OFCs, channeling most offshore investments.
- Many OFCs are highly developed countries, not just small islands.

## Abstract

Multinational corporations use highly complex structures of parents and subsidiaries to organize their operations and ownership. Offshore Financial Centers (OFCs) facilitate these structures through low taxation and lenient regulation, but are increasingly under scrutiny, for instance for enabling tax avoidance. Therefore, the identification of OFC jurisdictions has become a politicized and contested issue. We introduce a novel data-driven approach for identifying OFCs based on the global corporate ownership network, in which over 98 million firms (nodes) are connected through 71 million ownership relations. This granular firm-level network data uniquely allows identifying both sink-OFCs and conduit-OFCs. Sink-OFCs attract and retain foreign capital while conduit-OFCs are attractive intermediate destinations in the routing of international investments and enable the transfer of capital without taxation. We identify 24 sink-OFCs. In addition, a small set of five countries -- the Netherlands, the United Kingdom, Ireland, Singapore and Switzerland -- canalize the majority of corporate offshore investment as conduit-OFCs. Each conduit jurisdiction is specialized in a geographical area and there is significant specialization based on industrial sectors. Against the idea of OFCs as exotic small islands that cannot be regulated, we show that many sink and conduit-OFCs are highly developed countries.