Fighting Multiple Tax Havens

33 Pages Posted: 8 Oct 2010  

May Elsayyad

Max Planck Institute for Tax Law and Public Finance; Ludwig Maximilian University of Munich - Munich Graduate School of Economics (MGSE)

Kai A. Konrad

Max Planck Institute for Tax Law and Public Finance; Social Science Research Center Berlin (WZB); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics

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Date Written: September 30, 2010

Abstract

This paper develops a competition theory framework that evaluates an important aspect of the OECD’s Harmful Tax Practices Initiative against tax havens. We show that the sequential nature of the process is harmful and more costly than a “big bang” multilateral agreement. The sequentiality may even prevent the process from being completed successfully. Closing down a subset of tax havens reduces competition among the havens that remain active. This makes their “tax haven business” more profitable and shifts a larger share of rents to these remaining tax havens, making them more reluctant to give up their “tax haven business”. Moreover, the outcome of this process, reducing the number of tax havens, but not eliminating them altogether, may reduce welfare in the OECD.

Keywords: tax haven, harmful tax practices, bidding for haven inactivation

JEL Classification: F21, H26, H77, H87

Suggested Citation

Elsayyad, May and Konrad, Kai A., Fighting Multiple Tax Havens (September 30, 2010). CESifo Working Paper Series No. 3195. Available at SSRN: https://ssrn.com/abstract=1688250

May Elsayyad

Max Planck Institute for Tax Law and Public Finance ( email )

Marstallplatz 1
Munich, 80539
Germany

Ludwig Maximilian University of Munich - Munich Graduate School of Economics (MGSE)

Kaulbachstrasse 45
München, 80539
Germany

Kai A. Konrad (Contact Author)

Max Planck Institute for Tax Law and Public Finance ( email )

Marstallplatz 1
Munich, 80539
Germany

HOME PAGE: http://www.tax.mpg.de/en/pub/home.cfm

Social Science Research Center Berlin (WZB) ( email )

Reichpietschufer 50
Berlin, 10785
Germany

HOME PAGE: http://www.wzb.eu/mp/fff/people/kai_konrad.en.htm

Centre for Economic Policy Research (CEPR)

90-98 Goswell Road
London, EC1V 7RR
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, 81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, 53072
Germany

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