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Offshore financial centers: Safe or tax havens

Listed author(s):
  • Patrice Pieretti

    ()

    (CREA, Universite du Luxembourg)

  • Jacques-François Thisse

    ()

    (Universite catholique de Louvain)

  • Skerdilajda Zanaj

    ()

    (CREA, Université de Luxembourg)

This paper explains why and how a small country can be an offshore financial center (OFC). We build a model involving a small and a large country competing for portfolio investments. They use two instruments, taxation and institutional infrastructure. We identify the conditions for an OFC to be a tax haven, a safe haven or both. The existence of a tax haven need not be as bad as claimed in the media because its presence fosters institutional competition which is beneficial to all investors,

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File URL: http://wwwfr.uni.lu/content/download/64520/813094/file/2013-20%20-%20Offshore%20fi?nancial%20centers%20-%20safe%20or%20tax%20havens.pdf
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Paper provided by Center for Research in Economic Analysis, University of Luxembourg in its series CREA Discussion Paper Series with number 13-20.

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Date of creation: 2013
Handle: RePEc:luc:wpaper:13-20
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  1. James R. Hines, 2010. "Treasure Islands," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 103-126, Fall.
  2. Hindriks, Jean & Peralta, Susana & Weber, Shlomo, 2008. "Competing in taxes and investment under fiscal equalization," Journal of Public Economics, Elsevier, vol. 92(12), pages 2392-2402, December.
  3. Hindriks, Jean & Myles, Gareth D., 2013. "Intermediate Public Economics," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262018691, January.
  4. Alberto Alesina & Enrico Spolaore, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1027-1056.
  5. Hampton, Mark P. & Christensen, John, 2002. "Offshore Pariahs? Small Island Economies, Tax Havens, and the Re-configuration of Global Finance," World Development, Elsevier, vol. 30(9), pages 1657-1673, September.
  6. Kai Konrad, 2008. "Mobile tax base as a global common," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(4), pages 395-414, August.
  7. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
  8. Zissimos, Ben & Wooders, Myrna, 2008. "Public good differentiation and the intensity of tax competition," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1105-1121, June.
  9. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
  10. Pieretti, Patrice & Zanaj, Skerdilajda, 2011. "On tax competition, public goods provision and jurisdictions' size," Journal of International Economics, Elsevier, vol. 84(1), pages 124-130, May.
  11. Justman, Moshe & Thisse, Jacques-Francois & van Ypersele, Tanguy, 2002. "Taking the bite out of fiscal competition," Journal of Urban Economics, Elsevier, vol. 52(2), pages 294-315, September.
  12. Agnès Bénassy-Quéré & Maylis Coupet & Thierry Mayer, 2007. "Institutional Determinants of Foreign Direct Investment," The World Economy, Wiley Blackwell, vol. 30(5), pages 764-782, May.
  13. Dharmapala, Dhammika & Hines Jr., James R., 2009. "Which countries become tax havens?," Journal of Public Economics, Elsevier, vol. 93(9-10), pages 1058-1068, October.
  14. Jack High (ed.), 2001. "Competition," Books, Edward Elgar Publishing, number 1751.
  15. Hauptmeier, Sebastian & Mittermaier, Ferdinand & Rincke, Johannes, 2012. "Fiscal competition over taxes and public inputs," Regional Science and Urban Economics, Elsevier, vol. 42(3), pages 407-419.
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