NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Tax Competition With Parasitic Tax Havens

Joel Slemrod, John D. Wilson

NBER Working Paper No. 12225
Issued in May 2006
NBER Program(s):   PE

We develop a tax competition framework in which some jurisdictions, called tax havens, are parasitic on the revenues of other countries. The havens use real resources to help companies camouflage their home-country tax avoidance, and countries use resources in an attempt to limit the transfer of tax revenues to the havens. The equilibrium price for this service depends on the demand and supply for such protection. Recognizing that taxes on wage income are also evaded, we solve for the equilibrium tax rates on mobile capital and immobile labor, and we demonstrate that the full or partial elimination of tax havens would improve welfare in non-haven countries, in part because countries would be induced to increase their tax rates, which they have set at inefficiently low levels in an attempt to attract mobile capital. We also demonstrate that the smaller countries choose to become tax havens, and we show that the abolishment of a sufficiently small number of the relatively large havens leaves all countries better off, including the remaining havens.

download in pdf format
   (309 K)

email paper

This paper is available as PDF (309 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w12225

Published: Slemrod, Joel & Wilson, John D., 2009. "Tax competition with parasitic tax havens," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1261-1270, December. citation courtesy of

Users who downloaded this paper also downloaded these:
Gumpert, Hines, and Schnitzer w17644 The Use of Tax Havens in Exemption Regimes
Hines Do Tax Havens Flourish?
Hines and Rice w3477 Fiscal Paradise: Foreign Tax Havens and American Business
Dharmapala and Hines w12802 Which Countries Become Tax Havens?
Desai, Foley, and Hines w10806 Economic Effects of Regional Tax Havens
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us