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Exploring the Role Delaware Plays as a Tax Haven


  • Scott D. Dyreng

    (Duke University)

  • Bradley P. Lindsey

    (North Carolina State University)

  • Jacob R. Thornock

    (University of Washington)


We examine whether Delaware serves as a domestic tax haven. We find that taxes play an important role in determining whether U.S. firms locate subsidiaries in Delaware and that these tax factors are economically important when compared to the legal and governance factors considered in prior research. In addition, we find that U.S. firms most likely to implement a Delaware–based state tax avoidance strategy have state effective tax rates that range between 0.7 and 1.1 percentage points lower than other firms on average. The tax savings represent a 15 – 24% decrease in the state tax burden, and translate to an increase in net income of between 1.04% and 1.47%. We also find that the tax benefits of using Delaware tax strategies are diminishing over time and we provide evidence this decline is partially attributable to efforts by states to limit the multi-state tax avoidance of U.S. firms.

Suggested Citation

  • Scott D. Dyreng & Bradley P. Lindsey & Jacob R. Thornock, 2012. "Exploring the Role Delaware Plays as a Tax Haven," Working Papers 1212, Oxford University Centre for Business Taxation.
  • Handle: RePEc:btx:wpaper:1212

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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. How important is Delaware as a tax haven?
      by Economic Logician in Economic Logic on 2012-10-26 19:14:00

    More about this item


    Delaware; Tax Haven; Corporate Governance; Corporate Tax Avoidance.;
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law


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