What Problems and Opportunities are Created by Tax Havens?

Posted: 25 Jan 2009

Multiple version iconThere are 2 versions of this paper

Date Written: winter 2008


Tax havens have attracted increasing attention from policy-makers in recent years. This paper provides an overview of a growing body of research that analyses the consequences and determinants of the existence of tax-haven countries. For instance, recent evidence suggests that tax havens tend to have stronger governance institutions than comparable non-haven countries. Most importantly, tax havens provide opportunities for tax planning by multinational corporations. It is often argued that tax havens erode the tax base of high-tax countries by attracting such corporate activity. However, while tax havens host a disproportionate fraction of the world's foreign direct investment (FDI), their existence need not make high-tax countries worse off. It is possible that, under certain conditions, the existence of tax havens can enhance efficiency and even mitigate tax competition. Indeed, corporate tax revenues in major capital-exporting countries have exhibited robust growth, despite substantial FDI flows to tax havens.

Keywords: tax havens, governance, tax avoidance, tax competition, FDI, H87, H25, F23, K10

Suggested Citation

Dharmapala, Dhammika, What Problems and Opportunities are Created by Tax Havens? (winter 2008). Oxford Review of Economic Policy, Vol. 24, No. 4, pp. 661-679, 2008, Available at SSRN: https://ssrn.com/abstract=1331825 or http://dx.doi.org/grn031

Dhammika Dharmapala (Contact Author)

University of Chicago Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States

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