Economic Effects of Regional Tax Havens / Mihir A. Desai, C. Fritz Foley, James R. Hines.

Format:

Book

Author/Creator:

Desai, Mihir A. (Mihir Arvind), 1968-

Contributor:

National Bureau of Economic Research.

Foley, C. Fritz.

Hines, James R., Jr., 1958-

Series:

Working Paper Series (National Bureau of Economic Research) no. w10806.

NBER working paper series no. w10806

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

How does the opportunity to use tax havens influence economic activity in nearby non-haven countries? Analysis of affiliate-level data indicates that American multinational firms use tax haven affiliates to reallocate taxable income away from high-tax jurisdictions and to defer home country taxes on foreign income. Ownership of tax haven affiliates is associated with reduced tax payments by nearby non-haven affiliates, the size of the effect being equivalent to a 20.8 percent tax rate reduction. The evidence also indicates that use of tax havens indirectly stimulates the growth of operations in non-haven countries in the same region. A one percent greater likelihood of establishing a tax haven affiliate is associated with 0.5 to 0.7 percent greater sales and investment growth by non-haven affiliates, implying a complementary relationship between haven and non-haven activity. The ability to avoid taxes by using tax haven affiliates therefore appears to facilitate economic activity in non-haven countries within regions.

Notes:

Print version record

October 2004.