Money Laundering Regulation: A Positive Spillover Effect on Tax Inequality (Agenda)

Abstract

Recent research has proven a correlation between money laundering activities and tax havens. One of the results of which is that multiple financial entities close down their branches or correspondent relations operating in tax haven countries due to the risks of money laundering , especially sanctions and reputational damage. This article examines and discusses how the fear of getting involved in money laundering contradicts the incentive of establishing or expanding tax havens and/or pushing for a low tax agenda in and outside of the EU. The article focuses on the incentives of placing a company (financial and non-financial), a branch or the like in a low tax county in relation to the EU regulatory framework regarding the prevention of money laundering, which has started the de-risking of companies in low tax countries. The overall purpose of the article is to analyze whether the anti-money laundering directive actually pushes forward an agenda for equal taxation and decreases the incentive of exploiting tax haven solutions that support an unequal international taxation.

Keywords: EU anti-money laundering directive, Tax haven, Equal taxation, Money laundering

JEL Classification: K34, H20, H26, H71