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" Political Economy of Offshore Finance "
Ananyev, Maxim
Treisman, Daniel S
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Latin Dissertation
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English
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| Record Number
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905812
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TL0f20z073
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| Main Entry
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Ananyev, Maxim
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| Title & Author
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Political Economy of Offshore Finance\ Ananyev, MaximTreisman, Daniel S
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| College
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UCLA
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| Date
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2018
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| student score
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2018
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| Abstract
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This dissertation analyzes the patterns of business elites' offshore usage and its impact on domestic politics. I advance two theoretical claims. First, the availability of offshore zones makes autocracies stronger by facilitating patron-client exchanges that keep regimes in power. Second, I argue that vulnerability to political risks prevents firms from using tax havens for tax avoidance. After providing some historical and economic background on the evolution of tax havens, I present a simple theory of patron-client exchange in autocracies that rely on a tax haven as a commitment device for a ruler. I argue that the availability of such a device makes elites more docile to the regime and prevents movements towards a more open and constrained regime.Then, I offer cross-national evidence that speaks to some of my theory's implications. In particular, I use previously untapped country-level data on the size of offshore holdings to test if offshore utilization prevents democratization. I find that the countries with higher offshore wealth in the year 2007 were less likely to democratize between 2007 and 2016. I show an array of placebo tests and robustness checks to demonstrate that my results are unlikely to be driven by previous regime dynamics, coup risk, or other potential confounders. Then, I move on to explore another important implication of my theory: an exogenous marginal decrease in the safety of offshore assets should trigger an increase in the spoils the ruler shares with the elite. I use recent rounds of international sanctions against the members of the Russian business community linked to the Russian regime to explore this empirical prediction.I also discuss corporate tax avoidance through tax havens. In particular, I ask why some firms avoid local taxes by establishing affiliates in tax havens while others do not. I argue that firms that are more vulnerable to political risk are less likely to engage in income shifting since complying fully with the tax law makes firms more valuable to the host government. I explore the empirical implications of my theory using a registry-based dataset that allows tracing connections between firms and tax havens. My findings improve our understanding of tax capacity and can inform international efforts to combat tax avoidance.
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Treisman, Daniel S
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UCLA
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