Tax haven networks and the role of the big 4 accountancy firms

This paper investigates the extent to which multinational enterprise’s (MNEs) manage their networks of tax haven subsidiaries. We use internalization theory to construct a number of hypotheses that are tested using negative binomial count models. The analysis is based on a database covering 5,912 MNEs in twelve advanced OECD countries over the period 2005-2013. We find that MNEs who are audited by the Big4 accountancy firms are also more likely to engage widely in this type of activity. Furthermore, technologically intensive MNEs from liberal market economies have more extensive tax haven networks compared to their counterparts in coordinated economies. This suggests that public policy linked to the role of auditors in giving tax advice may have a major impact on the tax avoidance behaviour of MNEs.