5 Tax haven influence and its future, conclusion and suggestions
5.4 Conclusion and further research
companies are in many ways the main responsible for the majority of tax evasion and losses to the government in both northern and southern countries (Gillespie, 2009). It is then preferable that the organizations like the OECD investigate new ways to reveal complex corporate structures, profit laundering and illegal transfer pricing.
Another challenge that has arose after the financial crisis is the lack of trust between the customer and bankers. The collapse of trust may have serious implications for the future of the financial industry (Guiso, 2010). If not moving away from ambiguous securities that are structured with the aid of tax havens to more safer ones, it may affect the availability and the cost of equity financing (Guiso, 2010). Investors may not be willing to bear risk and it may limit the raising of capital to the industry in general.
5.4 Conclusion and further research
Tax havens are affecting our financial markets in many different ways, both positive and negative. The increasing use of captives for instance in risk management strategy for insurance companies, can be positive and beneficially for both the user and the company.
There are also argued that tax havens have other positive effects like promoting better governance, more economical activity and that people are saving more with low taxes.
However, tax avoidance and lack of transparency in tax havens are also contributing to huge uncertainties in our financial markets. The increasing use of structured investment vehicles conducted through tax havens and the lack of financial regulation may have a very negative effect on our financial markets. This can lead to asymmetric information failures and low capital ratios, like what happened during the previous global financial crisis with the off-balance sheet status of the financial entities.
It is in our best interest to focus on developing our global financial regulation. The
international tax avoidance must be taken seriously and has to be improved in a sustainable way to secure more transparent global financial markets.
There are many research areas to investigate further that could be beneficial for the improvement of a more sound and transparent financial market. Suggested research areas could be to investigate more about the direct effects of the off balance sheet status of SIVs, and for example try to measure the numerical impact done by tax havens in the financial crisis. Other research areas could be to focus on the current developing of new PCC structures
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that are legalized worldwide and investigate the possible effect of the implementation of these structures in our financial markets.
In order to improve our international taxation system, is it crucial to increase our knowledge of the damage that for example tax havens are responsible for. It is then vital that continuing research in the area of international taxation is prioritized, to be able to understand the impact of tax havens in financial markets.
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