Feb. 16, 2015
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Algorithms for the Network Analysis of Bilateral Tax Treaties

Is the Netherlands a tax haven for multinational enterprises? Recent news articles give this impression.

Tax haven or conduit country?

To answer the question whether the Netherlands is indeed a tax haven, the CPB (Netherlands Bureau for Economic Policy Analysis) conducted a research (see here and in particular here). Companies mainly use the Netherlands as an intermediary country to send money through on a route from one country to another country. In this sense, the Netherlands is not a tax haven (a destination country where the money is stored) like the Bahamas or Bermuda, but a conduit country (an intermediary country on a route via which companies send their money).


In this thesis, we studied algorithms for the network analysis of bilateral tax treaties from a mathematical perspective. Furthermore, we applied the algorithms to investigate the role of the Netherlands and other countries as conduit countries, using data provided by the CPB. The dataset consists of 108 countries.

An illustration of our experimental findings is given below (click on the image to enlarge).


Betweenness centrality

To investigate which countries are the most important conduit countries, we used a notion for measuring the centrality of a vertex (country) in the network: betweenness centrality. When computing the betweenness centrality we considered all 'most profitable' tax-routes for companies. On what fraction of these 'most profitable' routes does a country appear as a conduit country, i.e. on what fraction of the most profitable routes is a country situated between the starting point and the end point of the route? This gives a measure for the 'centrality' of a country in the network.

We in particular considered weighted betweenness centrality. In weighted betweenness centrality, paths that start and end at important countries (measured according to the size of their economies) get a higher weight and count more for the betweenness centrality than paths between less relevant countries (countries with smaller economies).

Experimental conclusions

The thesis confirmed some conclusions made by the CPB: the Netherlands is an attractive conduit country (5th in the ranking according to weighted betweenness centrality) and that the most attractive conduit country is Great Britain.

The new conclusions of the experimental part of the thesis can be summarized as follows.

The results are illustrated via color-coded maps, similar to the one in the figure above.

Project Members

This project is run by Sven Polak and Guido Schäfer. If you are interested in the project please feel free to contact us.


  1. Master's thesis: Sven Polak, Algorithms for the Network Analysis of Bilateral Tax Treaties, December 2014. [pdf]
  2. PDF-versions of some world maps from the thesis, packed into one zip. [zip]
  3. The original CPB-project, "Ranking the Stars: Network Analysis of Bilateral Tax Treaties", [RL14], is run by Maarten van 't Riet and Arjan Lejour.