Where in the World Does Partnership Income Go? Evidence of a Growing Use of Tax Havens

49 Pages Posted: 18 Jan 2022

See all articles by Michael Love

Michael Love

University of California, Berkeley - Department of Economics

Date Written: December 14, 2021

Abstract

Partnerships are the fastest growing class of business entity in the United States and represent over one third of reported business income, but due to their legal complexity and opaque nature economists have not yet been able to identify where a sizeable portion of this income goes. In this paper, I use US federal tax records from 2005-2019 to compile a comprehensive analysis covering 99% of the income flowing to the owners of partnerships. I find that a much larger portion goes to foreign owners than previously thought, and that most of this amount goes to tax havens—over $1 trillion since 2011. The majority of these flows likely face zero tax in either the US or in the tax haven. Evidence suggests a prevalent use of entity arrangements by investment firms that shield investors from tax and reporting. Evidence also suggests a substantial increase in income reported after the enactment of FATCA.

Keywords: Business Tax, Partnerships, Tax Havens

JEL Classification: H20, H25, H26, K34

Suggested Citation

Love, Michael, Where in the World Does Partnership Income Go? Evidence of a Growing Use of Tax Havens (December 14, 2021). Available at SSRN: https://ssrn.com/abstract=3985535 or http://dx.doi.org/10.2139/ssrn.3985535

Michael Love (Contact Author)

University of California, Berkeley - Department of Economics ( email )

579 Evans Hall
Berkeley, CA 94709
United States

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