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

Author

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

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.

Suggested Citation

  • Lena Ajdacic & Eelke M. Heemskerk & Javier Garcia-Bernardo, 2021. "The Wealth Defence Industry: A Large-scale Study on Accountancy Firms as Profit Shifting Facilitators," New Political Economy, Taylor & Francis Journals, vol. 26(4), pages 690-706, July.
    • Handle: RePEc:taf:cnpexx:v:26:y:2021:i:4:p:690-706
    DOI: 10.1080/13563467.2020.1816947
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    Cited by:

    1. Manon Francois & Vincent Vicard, 2023. "Tax Avoidance and the Complexity of Multinational Enterprises," Working Papers 2023-04, CEPII research center.
    2. Maj Grasten & Leonard Seabrooke & Duncan Wigan, 2023. "Legal affordances in global wealth chains: How platform firms use legal and spatial scaling," Environment and Planning A, , vol. 55(4), pages 1062-1079, June.
    3. Christensen, Rasmus Corlin, 2022. "Transnational Infrastructural Power of Professional Service Firms," SocArXiv k9bd2, Center for Open Science.

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