Tax Havens: Friends or Foes?

Ona Stasiunaityte

Student thesis: Master thesis


As the economy becomes more global and more companies start their business in multiple countries, the problem of base erosion and profit shifting (BEPS) increases. The existing domestic tax systems are not consistent with international laws and it creates the opportunity for multinational companies to exploit its advantages and avoid or evade paying taxes to the authorities. The organisation for economic co-operation and development has been focusing on the issue for years. In 2013 it released an action plan on base erosion and profit shifting. The main purpose of the action plan is to improve the international tax system that will help to detect and avoid the problem of BEPS. Low tax jurisdictions are mentioned in the action plan only briefly, even though it was seen as a main player in the tax avoidance in the past. Such unexpectedness raises a doubt whether tax havens are as harmful as thought previously. Three articles help to understand better the role of tax havens in the global economy. Slemrod and Wilson (2009) claim that existence of tax havens in the world decreases the welfare of other countries in the world. Hong and Smart (2010) opposes saying that tax planning increases welfare of the countries. The model of Johannesen (2010) which has similarities to both above mentioned articles, conclude that world is better off with tax havens than without.

EducationsMSc in Advanced Economics and Finance, (Graduate Programme) Final Thesis
Publication date2014
Number of pages85