Capital outflow

Capital flight refers to the extensive and sudden transfer of property, money, precious metals or property abroad and the decline in demand for assets in the domestic economy.

General

The goal of capital flight is when there is inflation to maintain the value or otherwise circumventing domestic taxes ( see also tax avoidance, tax evasion, tax evasion ). The phenomenon of capital flight is so regularly associated with state action and inaction. Capital flight can often be seen as " voting with their feet " because the production factor capital can be transferred more quickly due to its high mobility than other factors of production. Expect economic agents unfavorable for them changing the ( tax) legal system, they may react with withdrawal of their capital.

Reported in the capital account capital flight, seen alone, but nothing about the economic situation and development of an economy indicates relevant is only the balance of payments, in which all economic sub-balances are included. To illustrate the example of the German Economy: The export strength of the German economy makes it possible that many goods are exported and spending a lot of money flowing into the country ( trade surplus ). This in turn makes it possible that flows on other things a lot of money abroad, such as contributions to the EU and the UN (reported in the transfer balance sheet), expenditure by German tourists abroad (reported in the balance of services ), loans to other countries (eg developing countries) and investments in foreign companies (both reported in the financial account).

The decision as to which country a company invests or in which country a person sits down, can be influenced by all location factors. These include transport infrastructure, communication infrastructure, the legal system, the monetary system, the banking system, the demand potential buyer of goods, the qualification of the workforce, the number of their illness and strike days, etc. The main objective of foreign investments by German companies is often the development of new markets. Often, the production goes where goods can be sold.

Previously, there were many - and Western - States numerous bureaucratic obstacles to capital flight. For example, it was to the early 1970s largely rigid exchange rates between most Western countries of about 1945 (see Bretton Woods system ); the central banks had to defend the fixed exchange rates.

In the media capital flight is sometimes dramatized.

For example, Luxembourg was for decades as an economy in which reaches much German capital. If billions were placed ( in € ) from Germany to Luxembourg accounts annually, by no means lost investment capital, as has sometimes been claimed.

In the small state such Luxembourg billions in the real economy Koenen will not be invested in interest- pregnant (but on the Luxembourg capital market); partially does the money - directly or indirectly - back to Germany (see also economic cycle ).

In Luxembourg some corporate taxes are low; Luxembourg banks have ( or had ) thus a competitive advantage compared to German banks.

The EU was and strives to harmonize their tax systems by measures to tax harmonization each other in order to facilitate the creation of a single market and / or to avoid tax competition. You also negotiating for years with the non-EU countries Switzerland and Liechenstein to " dry out " these so-called tax havens.

Reasons for capital flight

  • Fear of theft
  • Fear of discovery of criminal activities
  • Fear of expropriation by the state
  • Property taxation (eg high property tax )
  • ( perceived ) tax injustice

Potential capital Refugees

  • Rich people (tax evasion )
  • Criminals persons (theft, drug trafficking, illicit arms trafficking )
  • Government Affiliated persons ( in anticipation of a political exile )
  • Central banks ( foreign exchange intervention )
  • Opposition
  • Savers ( diversification of assets to several countries, banks and other debtors )

Well-known examples

Many Greeks have invested abroad since the accession of Greece to the euro zone euro amounts at banks. This is facilitated by online banking. They have little confidence in Greek banks, who bought a greater extent than other banks Greek government bonds. The drama of the Greek national debt is publicly well known since about the fall of 2009; escaped in May 2010, Greece only by an unsecured 80 - billion - euro loan from other EU countries a sovereign default (see Greek sovereign debt crisis from 2010).

Capital flight as a pressure medium

In many states, which belong to the so-called " economic periphery", was and is the ( financial and tax ) policy accompanied by a threat of force of the possible capital flight. The uncertainty in the individual states of the behavior of other states results in an effect that is described in the literature with " race to the bottom ". This refers to a race to the bottom in taxes and therefore the best ( for shareholders ) location factors.

Noble metal Tax exile Capital (economics) Invisible balance Eminent domain Currency intervention Otmar Emminger
464216
de