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Tax havens compliance with international standards: A temporal perspective
Author(s) -
Pieretti Patrice,
Pulina Giuseppe,
Zanaj Skerdilajda
Publication year - 2020
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/roie.12450
Subject(s) - compliance (psychology) , tax haven , economics , capital (architecture) , perspective (graphical) , double taxation , tax avoidance , international economics , public economics , computer science , psychology , social psychology , archaeology , history , artificial intelligence
This paper contributes to the debate centering 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 tax base within the onshore region is minimized when compliance is simultaneous and occurs at the earliest possible date. Surprisingly, compliance of just one tax haven is not necessarily better than no compliance at all.