By Javier Garcia-Bernardo, Eelke Heemskerk, Frank Takes and Jan Fichtner.

First came the Panama Papers, then the BahamasLeaks. Journalists continue to shed light on and raise a public outcry over the offshore financial centers that corporations use to reduce their tax bill — something that is still being challenged in court.

A new study has now uncovered all the world’s corporate tax havens and, for the first time, revealed the intermediary countries that companies use to funnel their money into these places.

Published on July 24 in the academic journal Scientific Reports, the paper Uncovering Offshore Financial Centers: Conduits and Sinks in the Global Corporate Ownership Network shows that offshore finance is not the exclusive business of exotic, far-flung places such as the Cayman Islands and Bermuda.

The Netherlands and the United Kingdom also play a crucial — although a heretofore obscure — role in the tax-avoidance game, acting as conduits for corporate profits as they make their way to tax havens.

What makes a tax shelter

Tax havens are a popular, legal and often secret instrument for multinational corporations to move capital across borders. By taking advantage of loopholes in various national legislations and placing operations in countries with low taxes, companies can reduce their tax rate from around 35 percent to 25 percent to 15 percent or lower.

Silicon Valley companies have become expert at this tactic. Using a combination of subsidiaries in Ireland, the Netherlands and Bermuda to reduce its tax burden, Apple paid just 0.005 percent tax on its European profits in 2014, the European Commission reported.

If multinationals’ profits were accounted for where the economic activity takes place, they would pay a combined US$500 to US$650 billion more on taxes each year, according to estimates by the Tax Justice Network and the International Monetary Fund. Of this, around US$200 billion a year would go to developing countries, which is more than they receive annually in development aid ( US$142.6 billion).

Findings like this have put tax havens on the radar of U.S. and European regulators, but there’s no broadly accepted definition of what makes a country an offshore financial center.

Lists published by the Organization of Economic Cooperation and Development (OECD) and the International Monetary Fund use different criteria to define tax shelters, and their outcomes are highly politicized.

READ: [You’ll Likely Pay Less Taxes Than in These Countries Than the U.S.]

The Tax Justice Network’s Financial Secrecy Index, Oxfam’s list of the worst corporate tax havens and Jan Fichtner’s 2015 Offshore-Intensity Ratio have proven to be more useful.

Fichtner (a co-author of this article) provides a rough yardstick for judging OFC jurisdictions by examining the proportion between foreign capital, such as FDI, and the size of the domestic economy.

What none of these measures can tell us, though, is the origin of the foreign investment reported by these tax havens. How does Apple’s money get from California to Bermuda anyway?

Big data and network analysis

By bringing together political economists and computer scientists in the CORPNET research group at the University of Amsterdam, it became possible to study how corporations make use of particular countries and jurisdictions in their international ownership structures. The novel, data-driven network approach of our study shed light on how offshore finance flows across the globe.

We looked not at country-level statistics but at detailed company data. By asking which countries and jurisdictions play a role in corporate ownership chains that is incommensurate with the size of their domestic economies, we were able to identify, for the first time, a complex global web of offshore financial centers.

We analyzed the entire massive global network of ownership relations, with information of over 98 million firms and 71 million ownership relations. This granular firm-level network data helped us to distinguish two kinds of tax havens: sinks and conduits.

Introducing sinks and conduits

“Sink OFCs” attract and retain foreign capital. We identified 24 sink OFCs, including well-known tax havens such as Luxembourg, Hong Kong, the British Virgin Islands, Bermuda, and the Cayman Islands, but also Taiwan, a heretofore unnoticed tax haven.

Using our method, we can now investigate which jurisdictions are used by corporations en route to sinks. These “conduit OFCs” are attractive intermediate destinations because their numerous tax treaties, low or zero withholding taxes, strong legal systems and good reputations for enabling the quiet transfer of capital without taxation.

We found that a handful of big countries — the Netherlands, the U.K., Switzerland, Singapore and Ireland — serve as the world’s conduit OFCs. Together, these five conduits channel 47 percent of corporate offshore investment from tax havens, according to the data we analyzed.

The Netherlands leads the pack with 23 percent, followed by the UK (14 percent), Switzerland (6 percent), Singapore (2 percent) and Ireland (1 percent).

Each conduit jurisdiction is specialized both geographically and in industrial sectors. The Netherlands excels in holding companies, for example, while Luxembourg favors “administrative services.” Hong Kong’s geographic specialty lies in connecting to the British Virgin Islands and Taiwan.

New targets

Our findings debunk the myth of tax shelters as exotic far-flung islands that are difficult, if not impossible, to regulate. Many offshore financial centers are highly developed countries with strong regulatory environments.

That means that targeting conduit OFCs rather than sinks could prove more effective in stemming tax avoidance. This realization may help European Union and the OECD officials, who have increased pressure on cracking down on tax avoidance since the 2008-2009 financial crisis (to modest effect), by helping regulators better tailor their policies.

British Finance Minister Philip Hammond has speculated that the U.K. could become a European tax haven if the EU fails to offer it a good Brexit deal. But, in practice, the City of London is already a major offshore financial center.

Of 24 sink OFCs, 18 have a current or past dependence to the U.K., including major tax havens such as the Cayman Islands, Bermuda, British Virgin Islands and Jersey. New territories with low or no corporate taxes are continuously emerging as sink OFCs, but, as our study shows, there are just a handful of conduit OFCs.

Results and details are available on the dedicated website www.ofcmeter.org

This article was written by Javier Garcia-Bernardo, Ph.D. candidate at the University of Amsterdam; Eelke Heemskerk, associate professor of political science at the University of Amsterdam; Frank Takes, postdoctoral researcher at the University of Amsterdam, Leiden University, and Jan Fichtner, postdoctoral researcher in political science at the University of Amsterdam, for The Conversation on July 24. It is republished with permission.

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These Countries Are Conduits for the World’s Largest Tax Havens originally appeared on usnews.com