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

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.

Asset Manager Capitalism as a Corporate Governance Regime

“…Note that asset managers are merely the most visible agents in a sprawling "wealth defense industry"(Winters 2017;Ajdacic et al 2020). …”

NY‐LON 2020: The changing relations between London and New York in corporate globalisation

“…It is this concentration of capital that has created new servicing opportunities, which London has taken advantage of, and New York much less so (Atkinson, 2020). And as Ajdacic et al (2020) clearly show, it is accountancy firms in particular, through their enabling of global wealth chains providing tax and other advantages for clients, which constitute the key sector here.…”

Conclusion: The present and future of social service marketisation

“…There has been considerable controversy about the quality and integrity of their work in this fully private domain, prompting the establishment in Australia in 2019 of a joint parliamentary inquiry into the regulation of auditing in Australia (Parliamentary Joint Committee on Corporations and Financial Services 2020). Our interest here is in the findings of international research that the big four are deeply implicated in assisting their clients with tax evasion (Ajdacic et al 2021;Jones et al 2018), which weakens both government capacity and public trust. In Australia, a commissioner of the Australian Taxation Office has called these companies a 'systemic' risk to the integrity of Australia's tax system (Tadros 2019).…”