6. Conclusion
Globalisation has vastly expanded the opportunities for MNEs to build complex international value chains and locate subsidiaries across the world to add value. These opportunities include operating subsidiaries for tax purposes. We have built on recent IB theory (see Jones & Temouri, 2016) and extended the FSA/CSA framework and the varieties of capitalism framework to the extent of tax haven use in contrast to the dichotomous choice approach seen in the existing literature. It is abundantly clear that firms with strong FSAs in terms of intangible assets appear to locate a number of subsidiaries in offshore tax havens. Further, MNEs form more LMEs have a higher degree of tax haven complexity compared to their CME peers. The ‘Double Irish with a Dutch Sandwich’ scheme shown above is just the tip of the iceberg. Tax haven complexity is part and parcel of the biggest MNEs tax planning structures and the Big 4 play a prominent part in the management and audit of these complex networks.
Our results suggest that the role of the Big 4 accountancy firms is far from insignificant. In aggregate, MNEs that use a Big 4 accountancy firms have a significantly higher tax haven incident rate compared to those firms that do not use a Big 4 auditor. Hence this paper demonstrates clear evidence of a strong correlation between tax haven use and the use of the Big 4. In addition, we also provide evidence of causation − we find that taking on a Big 4 accountancy firm is associated with at least a 2.9 percent higher growth rate in the number of tax haven subsidiaries over the period studied compared to those firms that do not use a Big 4 accountancy firm.
