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Tax havens compliance with international standards : a temporal perspective

Author

Listed:
  • Patrice Pierreti

    (CREA, Université du Luxembourg)

  • Giuseppe Pulina

    (CREA, Université du Luxembourg)

  • Skerdilajda Zanaj

    (CREA, Université du Luxembourg)

Abstract
This paper contributes to the debate centring 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 the tax base within the onshore region is minimized when compliance is simultaneous and occurs at the earliest possible date. Surprisingly, when the adoption of new standards does not severely reduce the potential supply of capital and onshore capital is sufficiently tax sensitive, the compliance of a lone tax haven does not decrease the loss of tax base relative to the non-compliance of all the havens.

Suggested Citation

  • Patrice Pierreti & Giuseppe Pulina & Skerdilajda Zanaj, 2016. "Tax havens compliance with international standards : a temporal perspective," DEM Discussion Paper Series 16-07, Department of Economics at the University of Luxembourg.
    • Handle: RePEc:luc:wpaper:16-07
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    File URL: https://hdl.handle.net/10993/31304
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    References listed on IDEAS

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    Cited by:

    1. Konrad, Kai A. & Stolper, Tim B.M., 2016. "Coordination and the fight against tax havens," Journal of International Economics, Elsevier, vol. 103(C), pages 96-107.
    2. Ludger Schuknecht & Vincent Siegerink, 2021. "The Political Economy of the International Tax Transparency Agenda in the G20/OECD Context," CESifo Working Paper Series 8813, CESifo.
    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.
    4. Pieretti, Patrice & Pulina, Giuseppe, 2024. "A game-theoretic analysis of international tax compliance," Economic Modelling, Elsevier, vol. 134(C).

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    More about this item

    Keywords

    Tax Havens; International standards; Compliance; Timing;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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