Coordination and the Fight Against Tax Havens

26 Pages Posted: 1 Apr 2015

See all articles by Kai A. Konrad

Kai A. Konrad

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

Tim Stolper

Max Planck Institute for Tax Law and Public Finance

Date Written: March 2015

Abstract

The success or failure of the fight against tax havens is the outcome of a coordination game between a tax haven and its potential investors. Key determinants are the costly international pressure and the haven country's revenue pool. The latter is determined endogenously by the decisions of many individual investors. Our findings explain why some havens attract large sources of international investment and earn large revenues while other countries do not, and why their profits are not competed away. We identify a trade-off between fighting tax havens and high tax rates or, similarly, small fines for disclosed tax evasion.

Keywords: initiatives against harmful tax practices, tax evasion, tax havens

JEL Classification: G20, H26, H87

Suggested Citation

Konrad, Kai A. and Stolper, Tim, Coordination and the Fight Against Tax Havens (March 2015). CEPR Discussion Paper No. DP10519, Available at SSRN: https://ssrn.com/abstract=2588422

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

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

Tim Stolper

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

Marstallplatz 1
Munich, 80539
Germany

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