💱 Secrecy-seeking capital has been a key concern for global – and LatAm – tax policy for decades. With the advent of crypto as a new medium for financial transactions, governments are increasingly concerned about the obsolescence of the measures they have in place to “shed light” on the hidden assets of tax evaders and money launderers.
In an article titled “From tax havens to cryptocurrencies: secrecy-seeking capital in the global economy” and published in Vol. 31, N. 2, of the Review of International Political Economy (2024), authors Matti Ylönen, Ringa Raudla and Milan Babic identify two core practices – “organizational ring-fencing” and “swarming” – which explain how secrecy-seeking capital has adjusted to the global pushback against tax havens. The authors illustrate their analysis by referring to the example of Estonia and call for a research agenda that positions global tax governance to address related challenges in the future.
Some of the article’s highlights include:
❇ Organizational ring-fencing occurs in the traditional banking sector and relates to the operations between the banks’ branches and subsidiaries and their parent companies. It captures how banks or other financial institutions insulate certain activities (e.g., IT systems and financial reporting) or corporate-level assets from regulatory oversight. (p. 3)
❇ Swarming is the rapid influx of numerous firms into a single jurisdiction. As a result, the volume of incoming companies overwhelms regulatory authorities and hinders their effective monitoring. (p. 3)
❇ With the increased relevance of so-called “onshore” states and the rise of fintech and cryptocurrencies as novel opportunities for regulatory arbitrage, the authors argue that it is the lack of administrative capacity more than the lack of rules that facilitates the development of new practices of secrecy-seeking capital in the contemporary global political economy. (p. 7)
You can find the authors’ article here (https://bit.ly/3SnckLJ) and as a PDF attached to this post. If you are interested in reading more about tax policy and cryptoassets, here is a short list of books/articles on the topic recommended by the Latin American Tax Policy Forum (LATPF):
➡ “Bitcoin: a tributação de criptomoedas. Da taxonomia camaleônica à de criptoativos sem emissor identificado”, by Daniel de Paiva Gomes (2nd edition – 2022). Published by Thomson Reuters (Revista dos Tribunais). Available in Portuguese at: https://amzn.to/46e2JfS
➡ “Fiscalidad de las Criptomonedas y de la Economía Digital”, by Alejandro A Aued, Gabriel Bordignon, Rodrigo Luis González Cao, María Florencia Moren 🇦🇷 and Gabriel Alejandro Vadell (2020). Published by EDICON. Available in Spanish at: https://bit.ly/3We7fGS
➡ “Taxing the Blockchain: How Cryptocurrencies Thwart International Tax Policy”, by Ben Molloy (2019). Published by University of Oregon School of Law. Available at: https://bit.ly/3y6uDxY 🌎 🌍 🌏
