Unilateral measures against offshore tax evasion

The example of the Argentinean corporate supervisory board (Inspección General de Justicia, IGJ)

Diploma Thesis , 2008 , 143 Pages , Grade: 1,3

Politics - Region: Middle and South America

(...) The present thesis seeks to contribute to substantial answers to this question. Its subject is a set of regulatory measures taken by the Argentinean Corporate Supervisory Board Inspección General de Justicia (IGJ) between 2003 and 2005. One of their alleged aims is to counteract offshore tax evasion through a ban of the aforementioned shell companies, an approach which is deemed to be unique and novel worldwide. The venture of the IGJ rests on the assumption that the bona fide-treatment of the latter’s legal person is crucial for cross-border tax evasion. Designed as an explorative case study, the thesis’ central interrogative is about the normative-judicial scope and the factual impact of IGJ’s policy on offshore tax evasion. Much of the data underlying the answers given henceforth has been collected through a two-months field research in Buenos Aires.
The structure of the thesis is as follows: The second chapter opens with a brief section of definitions of key terms used thereafter (2.1). Section two (2.2) seeks to clarify the practical relevance of the subject and to establish and engross its links to two theoretical debates. Thereby, the central question and two related hypothesis will be carved out (2.3). In the following section (2.4), the subject is circumscribed. Epistemological and broad methodological issues are addressed in section 2.5, sources and formal issues are presented in 2.6. The field research and interview methodology are subject of section 2.7. The third chapter is dealing mostly in a descriptive way with the legal context of the IGJ-norms (3.1), focuses on institutional and general administrative issues in relation to their implementation (3.2), presents the regulations in question chronologically (3.3) and eventually summarizes the mayor issues relevant for the subsequent analysis (3.4). In the fourth chapter, the measures are subject to analysis with regard to a test of the first hypothesis presented in chapter two. The fifth chapter seeks to do the same for the second hypothesis, although the venture is far more complex and the results are more ambiguous. Some points of departure for further research are addressed. In the sixth chapter, an answer to the central question is provided, the results of the test of both hypotheses are summarized, conclusions are drawn and a more generic outlook is given.

Inhaltsverzeichnis (Table of Contents)

• 1 Introduction
• 2 Theoretical background, research subject and methodology
  • 2.1 Definitions of key concepts
    • 2.1.1 Offshore
    • 2.1.2 Tax evasion
    • 2.1.3 Offshore tax evasion
    • 2.1.4 Offshore financial centre (OFC) and tax haven
    • 2.1.5 Offshore (shell) company
  • 2.2 Theoretical Background and Relevance
  • 2.3 Research Question and Hypotheses
  • 2.4 Delimitation
  • 2.5 Epistemological background and Methodology
  • 2.6 Sources and Formality
  • 2.7 Field research: qualitative and quantitative methods
• 3 Corporate Law, Institutions and Policy
  • 3.1 Judicial Context: Corporate Law on the federal level
  • 3.2 Institutional Framework: Implementation on the provincial level
  • 3.3 Offshore Corporate Policy: IGJ-General Resolutions 2003-2005
    • 3.3.1 IGJ-RG 7/03 - Centrepiece: Real Economic Activity Criteria
    • 3.3.2 IGJ-RG 8/03 – End to Actos Aislados Provision
    • 3.3.3 IGJ-RG 12/2003 – Defining and Supporting Adecuación
    • 3.3.4 IGJ-RG 22/04 – Exemption of Investment Vehicles
    • 3.3.5 IGJ-RG 2/05 – Severing of Real Economic Activity Criteria
    • 3.3.6 Resolution IGJ-RG 3/05 – Identification of Shareholders
    • 3.3.7 IGJ-RG 7/05 – Integration and Reordering
  • 3.4 Summary: Two layers and two criteria interplaying in implementation practice
• 4 Analysis and Test of Hypothesis 1
  • 4.1 Qualitative Analysis
  • 4.2 QuantitativeAnalysis
• 5 Hypothesis 2: widening the perspective
  • 5.1 Offshore tax evasion: framework of analysis
  • 5.2 Bottlenecks in the puzzle: Access to foreign currencies
  • 5.3 The Argentinean Tax-System: Law and Judiciary
  • 5.4 Mechanisms of illicit trans-border capital flows in Argentina
    • 5.4.1 Enabling Entities
    • 5.4.2 Enabling (accounting and/or tax) Devices
  • 5.5 Thoughts on quantitative assessments
• 6 Conclusions

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This diploma thesis focuses on the regulatory measures implemented by the Argentinean Corporate Supervisory Board, Inspección General de Justicia (IGJ), between 2003 and 2005, with the stated aim of counteracting offshore tax evasion. It aims to analyze the legal framework and the practical impact of these measures on offshore tax evasion activities. The key themes explored in the thesis are:

• The definition and legal framework of offshore tax evasion
• The role of offshore shell companies in facilitating tax evasion
• The effectiveness of unilateral measures against offshore tax evasion
• The mechanisms and channels used for offshore tax evasion
• The interplay between different Argentinean government agencies in countering offshore tax evasion

Zusammenfassung der Kapitel (Chapter Summaries)

• Chapter 1: Introduction This chapter introduces the topic of offshore tax evasion and its significance in both developed and developing countries. It highlights the growing concern about the role of tax havens in facilitating financial crime, corruption, and tax avoidance.
• Chapter 2: Theoretical background, research subject and methodology This chapter provides a comprehensive definition of key concepts related to offshore tax evasion, such as offshore jurisdictions, tax havens, shell companies, and capital flight. It also establishes the theoretical frameworks underpinning the research, including international development and tax competition theories. The research question and two hypotheses are formulated, focusing on the legal scope and practical impact of the IGJ measures.
• Chapter 3: Corporate Law, Institutions and Policy This chapter delves into the legal context of the IGJ measures, specifically examining Argentinean Corporate Law (LS) and the related regulatory and supervisory arrangements. The chapter explores the IGJ’s institutional framework and examines the key General Resolutions issued between 2003 and 2005, which established the administrative regime for foreign companies operating in Buenos Aires.
• Chapter 4: Analysis and Test of Hypothesis 1 This chapter examines Hypothesis 1, which claims that measures undertaken by a single developing country against offshore tax evasion have no impact on the behavior of tax evaders. The chapter presents both qualitative and quantitative evidence, demonstrating that the IGJ measures have indeed altered the behavior of offshore shell companies operating in Buenos Aires.
• Chapter 5: Hypothesis 2: widening the perspective This chapter explores Hypothesis 2, which posits that measures against offshore tax evasion merely compel evaders to utilize more indirect methods. It analyzes different mechanisms and channels used for offshore tax evasion in Argentina, including the role of foreign exchange access, tax legislation, and accounting devices. The chapter also investigates the effectiveness of countermeasures implemented by the tax authority, AFIP.
• Chapter 6: Conclusions This chapter summarizes the findings of the thesis, concluding that the IGJ measures have proven comprehensive and effective in restricting the operation of offshore shell companies in Buenos Aires. The chapter discusses the limitations of the research and outlines potential avenues for further investigation, particularly in relation to the effectiveness of unilateral measures in combating offshore tax evasion more broadly.

Schlüsselwörter (Keywords)

This diploma thesis explores the challenges of combating offshore tax evasion, focusing on the specific case of Argentina. It delves into key concepts such as tax havens, offshore financial centers, shell companies, capital flight, and the role of institutions such as the IGJ, AFIP, and BCRA in addressing these issues. The thesis examines the effectiveness of unilateral measures against offshore tax evasion, considering both legal frameworks and the practical impact on the behavior of tax evaders.

• College: Free University of Berlin
• Grade: 1,3
• Author: Markus Meinzer (Author)
• Publication Year: 2008
• Pages: 143
• Catalog Number: V115900
• ISBN (eBook): 9783640181773
• ISBN (Book): 9783640181957
• Language: English
• Tags: Unilateral