A Journey from a Corruption Port to a Tax Haven

34 Pages Posted: 27 Oct 2011

See all articles by Shafik Hebous

Shafik Hebous

International Monetary Fund

Vilen Lipatov

Cornerstone Research; CESifo

Date Written: October 27, 2011

Abstract

We sketch a model according to which tax havens attract corporate income generated in corrupted countries. In our framework, tax havens have two opposite effects on welfare. First, tax havens’ services have a positive effect on welfare through encouraging investment by firms fearing expropriation and bribes in corrupt countries. Second, by supporting corruption and the concealment of officials’ bribes, tax havens discourage the provision of public goods and hence have also a negative effect on welfare. The net welfare effect depends on the specified preferences and parameters. One source of this ambiguity is that the presence of multinational firms in corrupted countries is positively associated with demanding tax havens’ operations. Using firm-level data, we provide empirical support for this hypothesis.

Keywords: tax havens, tax avoidance, tax evasion, multinational firms, corruption

JEL Classification: F230, H250, H320

Suggested Citation

Hebous, Shafik and Lipatov, Vilen, A Journey from a Corruption Port to a Tax Haven (October 27, 2011). CESifo Working Paper Series No. 3620, Available at SSRN: https://ssrn.com/abstract=1950109 or http://dx.doi.org/10.2139/ssrn.1950109

Shafik Hebous (Contact Author)

International Monetary Fund ( email )

Washington, DC
United States

Vilen Lipatov

Cornerstone Research ( email )

1000 El Camino Real
Menlo Park, CA 94025-4327
United States

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
136
Abstract Views
1,242
Rank
433,499
PlumX Metrics