Tax Havens Compliance with International Standards: A Temporal Perspective

23 Pages Posted: 6 Jun 2020

See all articles by Patrice Pieretti

Patrice Pieretti

Universite du Luxembourg; Centre de Recherche en Économie Appliquée (CREA)

Giuseppe Pulina

Universita di Cagliari

Skerdilajda Zanaj

Universite du Luxembourg

Date Written: February 2020

Abstract

This paper contributes to the debate centering on the fight against aggressive tax avoidance practices through the release of international standards. We develop a model in which identical tax havens decide upon their compliance date while competing for onshore capital. The timing of these decisions depends on the effects of two opposing forces. One force is linked to the tax sensitivity of international capital and the other to the reaction of nearby potential capital. When the former force dominates, asynchronous compliance arises, which occurs even with identical tax havens and perfect information. However, when the latter force dominates, tax havens comply simultaneously. In any case, the loss of tax base within the onshore region is minimized when compliance is simultaneous and occurs at the earliest possible date. Surprisingly, compliance of just one tax haven is not necessarily better than no compliance at all.

Suggested Citation

Pieretti, Patrice and Pulina, Giuseppe and Zanaj, Skerdilajda, Tax Havens Compliance with International Standards: A Temporal Perspective (February 2020). Review of International Economics, Vol. 28, Issue 1, pp. 279-301, 2020, Available at SSRN: https://ssrn.com/abstract=3619300 or http://dx.doi.org/10.1111/roie.12450

Patrice Pieretti (Contact Author)

Universite du Luxembourg ( email )

L-1511 Luxembourg
Luxembourg

Centre de Recherche en Économie Appliquée (CREA) ( email )

Campus Limpertsberg
162A, avenue de la Faïencerie
Luxembourg, 1511
Luxembourg

Giuseppe Pulina

Universita di Cagliari ( email )

Cagliari, 09124
Italy

Skerdilajda Zanaj

Universite du Luxembourg ( email )

L-1511 Luxembourg
Luxembourg

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