Professional action in global wealth chains

Abstract

This article provides a framework for explaining professional action in multi‐jurisdictional tax and finance environments, focusing on how relationships between clients, professionals, and regulators shape market structures. Given the complexity of tax and financial regulations within and across national systems, professionals experienced in accounting, financial, legal, and policy systems have opportunities to engage to increase information asymmetries rather than lower them. This article draws on the recent literature on Global Wealth Chains to theorize how professionals develop action profiles to exploit opportunity structures through information gaps. We develop a theoretical framework for understanding how professionals may intentionally, and as a matter of strategy, exploit information gaps in different socio‐economic contexts. We provide case vignettes of client‐professional‐regulator relationships in multi‐jurisdictional tax and finance management, highlighting how professional action shapes wealth chains and attempts at regulatory intervention. Our theoretical contribution is to link micro‐level interactions to macro‐level structures of wealth creation and protection in the transnational economic and legal order.

Tax havens and international business: A conceptual framework of accountability‐avoiding foreign direct investment

“…While Escape FDI captures many of the elements that have traditionally been discussed in the tax haven‐related literature, it seems to have an unnecessarily restrictive scope that prevents it from covering the whole range of inter‐related motives that drive tax haven investments. After all, tax havens are not only about escaping societal responsibilities, but also, for example, about firms’ structuring their internal financial flows in ways suited to increase their control over issues such as transparency, financial regulations, management of risks and beyond (Christensen et al., 2020; Palan et al., 2009). All of these decisions affect the level of accountability, depending on the applicable laws.…”

“…While this framework has been helpful in explaining how and why FDI takes place, it fails to capture the kinds of artificial profit shifting discussed in this paper. After all, accountability‐avoiding FDI does not concern the relative costs of traditional factor endowments, consumer tastes or supply capacities; rather, it aims at artificially delinking the intra‐firm monetary flows from those factors (Christensen et al., 2020).…”

Taxation: A Regulatory Multilevel Governance Perspective

“…Multinational firms and wealthy individuals seize these opportunities to create complex transnational production and “wealth chains,” in which they play out the various jurisdictions against each other, to lower their tax bills (Christensen et al . 2020).…”

Transparency

“…New tax transparency rules have wide-ranging economic, normative, and political consequences for the regulatory context of global wealth chains (GWCs). Tax transparency is a critical wealth chain asset, a legal affordance that shapes the information asymmetries between wealth chain "insiders" and "outsiders, " and a key component of corporate financial and reputational management (Christensen et al, 2021). More transparency means more information available for outsiders to mount regulatory and reputational challenges to corporate tax practices-a risk to the differential returns earned by firms able to obscure information around their tax practices.…”