page_title: Conduit and Sink OFCs
section_title: CORPNET Report
hierarchical_section_title: Conduit and Sink OFCs / CORPNET Report
caption_attribution_description: English: Uncovering Offshore Financial Centers: Conduits and Sinks in the Global Corporate Ownership Network
context_page_description: Conduit OFC and Sink OFC is an empirical quantitative method of classifying corporate tax havens, offshore financial centres and tax havens.
  Traditional methods for identifying tax havens analyse tax and legal structures for base erosion and profit shifting 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.
  The results were published by the University of Amsterdam's CORPNET Group in 2017, and identified two classifications:
  24 global Sink OFCs: jurisdictions in which a "disproportional amount of value disappears from the economic system".
  5 global Conduit OFCs: jurisdictions "through which a disproportional amount of value moves toward sink OFCs".
  Our findings debunk the myth of tax havens as exotic far-flung islands that are difficult, if not impossible, to regulate. Many offshore financial centers are highly developed countries with strong regulatory environments.
context_section_description: A report published in Nature in 2017 on the analysis of offshore financial centres called: "Uncovering Offshore Financial Centers: Conduits and Sinks in the Global Corporate Ownership Network", provided a quantitative and scientific approach to the classification of tax havens.
  The report was the result of a multi-year investigation by political economists and computer scientists in the CORPNET research group at the University of Amsterdam.  CORPNET is a European Research Council funded group at the University of Amsterdam investigating networks of corporate control.
  The report used the Moody's Orbis corporate database, to examine 98 million global companies and their 71 million ownership connections (using big data computer modelling) to identify 5 global Conduit OFCs (Netherlands, United Kingdom, Ireland, Singapore and Switzerland). These are countries of high financial reputation (i.e. not formally labelled "tax havens" by OECD/EU), but who have "advanced" legal and tax structuring vehicles (and SPVs) that help legally route funds to the 24 tax havens (called Sink OFCs), without incurring tax in the Conduit OFC (or even tax in the source of funds location, where royalty payment schemes can be used).
  The work built on methods established in the "Offshore–Intensity Ratio", and in particular the understanding "activity" relative to the "scale" of the domestic economy in a country.  At its crudest level, the Offshore-Intensity Ratio explains why the countries at the top of global GDP per capita lists are mostly tax havens.
  The EU Parliament's Policy Department on Economic and Scientific Policies included the research in its findings for the EU Committee on Money laundering, tax avoidance and tax evasion (PANA), and by tabulating against existing EU–IMF–FSI list of tax havens, showed material gaps in EU understanding of conduits.
  CORPNET's top 5 Conduits and top 5 Sinks are 9 of the 10 largest tax havens identified in 2010 by one of the academic founders of tax haven research, James R. Hines Jr..  Hines' 2010 list of 10 major tax havens only differs in its omission of the U.K., which in 2010, had only just reformed its corporate tax system.  CORPNET's top 5 Conduits and top 5 Sinks closely reconcile with the top 10 major corporate tax havens of other major academic and non–governmental organisation tax haven lists.  Other tax academics have incorporated the research into their understanding of tax havens.
caption: "Uncovering Offshore Financial Centers": Example of a corporate global ownership chain.[4]
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