Identification of Conduit Countries and Community Structures in the\n Withholding Tax Networks

Due to economic globalization, each country's economic law, including tax\nlaws and tax treaties, has been forced to work as a single network. However,\neach jurisdiction (country or region) has not made its economic law under the\nassumption that its law functions as an element of one network, so it has\nbrought unexpected results. We thought that the results are exactly\ninternational tax avoidance. To contribute to the solution of international tax\navoidance, we tried to investigate which part of the network is vulnerable.\nSpecifically, focusing on treaty shopping, which is one of international tax\navoidance methods, we attempt to identified which jurisdiction are likely to be\nused for treaty shopping from tax liabilities and the relationship between\njurisdictions which are likely to be used for treaty shopping and others. For\nthat purpose, based on withholding tax rates imposed on dividends, interest,\nand royalties by jurisdictions, we produced weighted multiple directed graphs,\ncomputed the centralities and detected the communities. As a result, we\nclarified the jurisdictions that are likely to be used for treaty shopping and\npointed out that there are community structures. The results of this study\nsuggested that fewer jurisdictions need to introduce more regulations for\nprevention of treaty abuse worldwide.\n