57 Pages Posted: 7 Nov 2006
Tax flight treaties could help to solve the $50 billion-a-year problem that tax flight (the evasion of income taxes through the use of offshore tax havens) poses for the United States. Tax flight treaties would offer tax havens a substantial portion of the increased tax revenues that they could generate by providing the United States with the enforcement assistance it needs. Those payments, potentially representing as much as half of the added tax revenue produced by tax flight treaties (and in all probability an amount that is greater than any GDP gains attributable to eliminating waste and other economic distortions related to tax flight), would give tax havens both the resources and the incentive they need to develop the administrative capacity necessary to supply the United States with income tax information. It is likely that those treaties would reduce the United States' collective well-being (particularly if measured in simple GDP terms) by transferring wealth from U.S. tax cheats to the governments of tax havens. A simplistic philosopher king model of international tax law, the strong form of which assumes that governments engage in cross-border tax cooperation to boost their respective GDPs, would suggest that tax flight treaties could never be effective. However, the more sophisticated model developed by the international law scholar Oona Hathaway, her integrated theory, supports a more optimistic conclusion regarding the potential of tax flight treaties.
Keywords: tax, tax haven, tax evasion, international law, international tax, tax treaties
JEL Classification: K39
Suggested Citation: Suggested Citation
Dean, Steven, Philosopher Kings and International Tax. Hastings Law Journal, Vol. 58, p. 911, 2007; Brooklyn Law School, Legal Studies Paper No. 63. Available at SSRN: https://ssrn.com/abstract=941581