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

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  • Hsun Chu

Abstract

type="main" xml:id="sjpe12046-abs-0001"> 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 foreign direct investment to tax havens.

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  • Hsun Chu, 2014. "Tax Enforcement Policy and the Provision of Public Goods with the Presence of Tax Havens," Scottish Journal of Political Economy, Scottish Economic Society, vol. 61(3), pages 304-321, July.
    • Handle: RePEc:bla:scotjp:v:61:y:2014:i:3:p:304-321
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    More about this item

    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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