The Taxation Regulations in Panama and Luxemburg

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Table of Contents

Problem
Theory and Method
Results

Problem

The minor thesis under discussion is aimed at investigating the problematic jurisdictions behind tax havens and the prevalence of the European Union’s (EU) and OECD’s regulatory efforts directed at states external to these entities. The purpose of the minor thesis is to identify the criteria behind blacklisting methods used by the EU and OECD when regulating tax havens to establish whether the pathways toward reducing losses due to tax avoidance are effective or merely reflect the post-colonial world order. The author emphasizes the problem of insufficient effectiveness of the blacklisting approach to regulating tax avoidance by states directing the attention of the research to the criteria used for blacklisting in the context of postcolonialism. The research question is as follows: “Are the EU’s “blacklist” and the OECD’s “harmful tax competition initiative” helpful to reduce losses due to tax avoidance in tax havens or are they an example of postcolonialism? Comparing Luxembourg and Panama through the lens of postcolonialism.”

At the beginning of the minor thesis, the author states that the focus of the research project includes the taxation regulations in two countries, namely Panama and Luxemburg, non-OECD and non-EU member states and an EU member, respectively. The author focuses on the blacklisting method of tax avoidance regulation to narrow down the scope of research related to the two countries. In particular, the scope of the research is predetermined by the finding that the EU and OECD impose their blacklisting regulations on countries that are external to their membership, which provides a basis for a research argument and is referred to by the author as a justification for the study project. Thus, when starting the research project, the author tasked themselves with an assignment of reviewing the criteria used by the EU and OECD when compiling blacklists of tax havens to determine their effectiveness and the possible effect of post-colonial politics.

Theory and Method

To approach the research question, the author used a qualitative comparative design to draw similarities and differences between the tax systems and their regulations in Panama and Luxemburg. The theoretical framework used for the minor thesis was the critical theory of postcolonialism, which entails an opportunity for theorizing and criticizing the validations of the UE’s and OECD’s blacklisting method of tax havens elimination and the minimization of harmful tax practices. In addition, the author integrates the conceptual frameworks from neo-colonial theory and dependency theory to set the investigated taxation problem in the context of the relationships between former colonizers and colonies. The method used for the study was a case study with a limited number of cases, namely two countries chosen for comparison.

The materials used for the case study included documents and official regulatory statements pertaining to blacklists of countries with improper taxation systems or harmful tax practices. The author used the documents to analyze the criteria for inclusion of countries into the blacklists at different times, as well as the inclusion of Panama or Luxemburg. In addition, the materials indicating taxation particularities in both countries were used. When framing the problem, the delimitation approach used by the author was the membership and non-membership in the EU of the selected countries, as well as the most recent (20 years) blacklists in relation to tax havens regulation. The author justified the scope of their research by the selection criteria for the two countries. In particular, it was stated that the selection of Panama and Luxemburg was predetermined by the presence of significant tax scandals in both countries, which provided a basis for investigating these particular cases in the research project. Inside the scope of the research are countries with low taxes for foreign investors; countries with no involvement in colonial history are outside the scope of the case study.

Results

The researcher managed to answer the research question clearly and in a logical, well-supported manner. The answers to the question were indicated on the basis of a thorough analysis of materials and the comparison of the two cases. In particular, the answer pertaining to the impact of postcolonialism was answered clearly, while the part on the effectiveness of the blacklisting measures on the minimization of losses was not answered due to the unavailability of sufficient data. In the analysis section of the paper, the author deliberately discusses the process of setting the document-based findings in the context of applied theories and implicitly demonstrates how the research questions were answered.

It is possible to identify how the method of comparison of the two cases was used since the author thoroughly remained focused on the particularities of blacklisting imposed or not imposed on the two countries. The rationale for making the assumptions about the impact of post-colonial politics was clearly delivered with examples. The thesis succeeded in answering the post-colonial part of the research question by raising an interesting and tentative issue in the field of tax avoidance regulation. However, it might have been better constructed if the effectiveness analysis part of the research question had been more deeply investigated via historical analysis of tax loss implications.

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The Taxation Regulations in Panama and Luxemburg

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