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Tax Enforcement Policy and the Provision of Public Goods with the Presence of Tax Havens

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  • Chu, Hsun

Abstract

A tax competition model is presented to investigate the effects of tax havens on the public good provision. We show that when countries facing a rise in tax havens change their tax enforcement strategies in response, the existence of tax havens may result in a higher level of equilibrium public good provision as compared to the case with no tax havens. Accordingly, tax havens could be welfare-enhancing for non-haven countries. This result offers a possible explanation for the recent empirical evidence that the corporate tax revenues in high-tax countries have actually increased with the growth in the flow of FDI to tax havens.

Suggested Citation

  • Chu, Hsun, 2013. "Tax Enforcement Policy and the Provision of Public Goods with the Presence of Tax Havens," MPRA Paper 53021, University Library of Munich, Germany, revised Nov 2013.
  • Handle: RePEc:pra:mprapa:53021
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    Cited by:

    1. Giuseppe Pulina & Skerdilajda Zanaj, 2021. "Tax competition and phantom FDI," DEM Discussion Paper Series 21-06, Department of Economics at the University of Luxembourg.
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    3. Giuseppe Pulina & Skerdilajda Zanaj, 2022. "Tax competition and phantom FDI," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(6), pages 1342-1363, December.

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    More about this item

    Keywords

    tax havens; enforcement policy; tax competition;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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