Links between tax havens, deforestation and illegal fishing exposed

August 13, 2018


The release of the "Paradise Papers" and "Panama Papers" exposed how multinationals, politicians and the wealthy use offshore tax havens to conceal their wealth and money flows, and reduce their exposure to tax. Now a team of researchers from the Stockholm Resilience Centre (SRC) at Stockholm University and GEDB (Global Economic Dynamics and the Biosphere, Royal Swedish Academy of Sciences) have published the first study showing how tax havens are linked to economic sectors that potentially cause serious global environmental impacts.

Their study, published in the journal Nature Ecology and Evolution, reveals that 70% of known vessels involved in illegal, unreported and unregulated (IUU) fishing are, or have been, flagged under a tax haven jurisdiction. The study also finds that on average 68% of all investigated foreign capital (18.4 out of 26.9 billion USD) to sectors associated with deforestation of the Amazon rainforest between the years 2000-2011, was transferred through tax havens.

"Our analysis shows that the use of tax havens is not only a socio-political and economic challenge, but also an environmental one. While the use of tax haven jurisdictions is not illegal in itself, financial secrecy hampers the ability to analyse how financial flows affect economic activities on the ground, and their environmental impacts," says Victor Galaz, lead author of the new study.

Taxing the global commons

The new study is part of an on-going research project called "Earth System Finance: New perspectives on financial markets and sustainability". It is led by GEDB and the Stockholm Resilience Centre in collaboration with Future Earth.

Most previous analyses of the environmental impacts of tax havens have been done by investigative journalists focusing on a few locations. The new study, on the other hand, takes a more systematic approach to analyse how tax havens influence the sustainability of the ocean and the Amazon rainforest as two key examples of global environmental commons.

"The absence of a more systemic view is not surprising considering the chronic lack of data resulting from the financial opaqueness created by the use of these jurisdictions," says co-author Beatrice Crona, GEDB executive director.

This lack of transparency hides how tax havens are linked to degradation of environmental commons that are crucial for both people and planet at global scales. The Amazon rainforest, for example, is critical for stabilizing the Earth's climate system while the ocean provides a vital source of protein and income for millions of people worldwide, particularly in low-income food-deficit countries.

From Cayman Islands to the Amazon

The paper includes the first quantification of foreign capital that flows into the beef and soy sectors operating in the Brazilian Amazon - two sectors linked to deforestation.

"Our analysis shows that a total of USD 26.9 billion of foreign capital was transferred to key companies in these sectors between October 2000 and August 2011. Of this investigated capital, about USD 18.4 billion was transferred from tax haven jurisdictions," they write.

The Cayman Islands turned out to be the largest transfer jurisdiction for foreign capital to these sectors operating in the Brazilian Amazon. The well-known tax haven provides three benefits to investors: legal efficiency, tax-minimization and secrecy.

Fishy havens

The new study also includes a systematic analysis of tax havens' role in Illegal, Unregulated and Unreported (IUU) fishing activities around the world. It revealed that 70% of the vessels found to carry out, or support, IUU fishing and for which flag information is available, are, or have been, flagged under a tax haven jurisdiction, in particular Belize and Panama.

Many of these tax havens are also so called flags of convenience states, countries with limited monitoring and enforcement capacity that do not penalise vessels sailing under their flag even if they are identified as operating in violation to international law.

The combination of tax havens and flags of convenience allow companies to sail fishing vessels with dual identity - one of which is used for legal and the other for illegal fishing activities.

"The global nature of fisheries value chains, complex ownership structures and limited governance capacities of many coastal nations, make the sector susceptible to the use of tax havens," says co-author Henrik Österblom, deputy science director at the Stockholm Resilience Centre.

Indirect subsidies

The new study suggests three issues which they believe should be central in future research efforts and governance of tax havens: (1) The loss of tax revenue caused by tax havens should be considered as indirect subsidies to economic activities with negative impacts on global commons; (2) Leading international fora and organizations, like UN Environment, should assess the environmental costs of these subsidies; (3) The international community should view tax evasion and aggressive tax planning as not only a socio-political problem, but also as an environmental one.
For more information and access to the article, please contact:

Owen Gaffney
Press contact
Stockholm Resilience Centre
Tel: +46734604833

Fredrik Moberg
Press contact
Stockholm Resilience Centre
Tel: +46706806553

Lead author:

Victor Galaz
Deputy Director, Stockholm Resilience Centre
+46 (0)737078528

More info:

The investigated companies operating in the Brazilian Amazon have been contacted before publication and invited to respond. The contact letter and all received responses are included in the new study's Supplementary Information.


Galaz, V., Crona, B., Dauriach, A., Jouffray, J-B., Österblom, H., and Fichtner, J. 2018. Tax havens and global environmental degradation. Nature Ecology and Evolution (Perspective).


The researchers based their analysis of the links between capital transfers via tax havens and economic sectors associated with deforestation in the Amazon rainforest on data from the Central Bank of Brazil. The data set includes "register of foreign capital" for the period between October 2000 and August 2011. This allowed the researchers to make the first quantification ever of flows of foreign capital from financial actors based outside of Brazil to the soy and beef sector operating in the Brazilian Amazon. The analysis of tax havens' role in unsustainable and illegal fishing activities was made by combining multiple datasets on fishing vessels and flag information, e.g. FAO Fishing Vessel Finder, data from Regional Fisheries Management Organizations and Interpol.

The definition of "tax havens" has been contested and revised at multiple occasions. This study used the term and definition of "tax havens" and the list presented by Gravelle, 2015:

Data sources

The datasets generated during and/or analysed during the current study are openly available in the figshare repository: s41559-018-0497-3

The dataset includes not only data used for the analysis of this study, but also additional data originally published by the Central Bank of Brazil.


Diagrams and illustrations showing the study's main results are available at request.

Stockholm Resilience Centre

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