Content area
Full Text
This essay critically revisits the roles and influences of tax havens in the world economy. It combines various messages of available studies in one scheme, and uses various data sources to document regularities regarding multinational firms, financial assets, and other relevant information for tax havens' businesses. The analysis motivates issues for future research and policy discussions.
Keywords: tax havens, tax avoidance, tax evasion, international taxation, corruption, offshore financial centers
JEL classification: F 23, H 25, H 32
1. Introduction
It is a widespread notion that a substantial portion of global investment flows is channeled through tax havens. A tax haven, in the public eye, is a haven for tax avoidance and tax evasion. The journey of money, in the form of corporate or personal income, searching for a tax-free harbor, has stimulated a number of academic studies, policy reports, and public debates. Some aspects, such as multinational firms' strategies for international tax planning, have been subjected to rigorous inspection by researchers,whereas others, such as possible nontax motives and heterogeneity across tax havens' services, have received thus far rather cursory examination by economists. This essay presents a synthesis of academic contributions on the roles and effects of tax havens in the world economy. It raises a number of questions, answers some, and underlines those that have not yet been (completely) answered in the literature. Further, it documents a number of observations based on data at the firm level - the Deutsche Bundesbank data on German investment abroad - and also based on statistics for the banking sector provided by the Bank for International Settlement (BIS).
Should we be concerned about tax havens?Tax havens are often viewed as playing the role of villainswhen discussing personal income tax evasion of top earners or strategies of multinational corporations for tax avoidance. Also, tax havens are linked in various discussions to shipping natural-resource revenues out of low-income and corrupt countries. In 2009, the Norwegian Ministry of Foreign Affairs published a report on tax havens with an entire chapter devoted to their effects on development.These and other issuesmake the topic of tax havens interdisciplinary and highly relevant from a policy standpoint.Would the global economy be unambiguously better offwithout tax havens?What firms establish affiliates in tax havens?What measures can be effective...