Conduit and Sink OFCs

Conduit OFC and sink OFC is an empirical quantitative method of classifying corporate tax havens, offshore financial centres (OFCs) and tax havens.[1][2][3]

"Uncovering Offshore Financial Centers": CORPNET's map of connections between countries.[4]

Traditional methods for identifying tax havens analyse tax and legal structures for base erosion and profit shifting (BEPS) tools. However, this approach follows a purely quantitative approach, ignoring any taxation or legal concepts, to instead follow a big data analysis of the ownership chains of 98 million global companies. The technique gives both a method of classification and a method of understanding the relative scale – but not absolute scale – of havens/OFCs.[5][6]

The results were published by the University of Amsterdam's CORPNET Group in 2017, and identified two classifications:[5][6]

  • 24 global sink OFCs: jurisdictions in which a "disproportional amount of value disappears from the economic system" (i.e. the traditional tax havens).[lower-alpha 1]
  • Five global conduit OFCs: jurisdictions "through which a disproportional amount of value moves toward sink OFCs" (i.e. modern corporate tax havens).[lower-alpha 2]

Our findings debunk the myth of tax havens[lower-alpha 3] as exotic far-flung islands that are difficult, if not impossible, to regulate. Many offshore financial centers[lower-alpha 3] are highly developed countries with strong regulatory environments.

Javier Garcia-Bernardo, Jan Fichtner, Frank W. Takes & Eelke M. Heemskerk, CORPNET University of Amsterdam[4]

In 2017, the European Parliament adopted the CORPNET approach into their frameworks for addressing tax havens.[7] In 2018, research by Gabriel Zucman showed that using Orbis database connections specifically underestimates the scale of Ireland, which the Zucman–Tørsløv–Wier 2018 list showed is the largest Conduit OFC in the world.[8][9][10] This aside, CORPNET's Conduits and Sinks reconcile closely with the most noted academic top ten tax haven lists.