Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)
Abstract: This paper surveys tax haven legislation and links the
literature on tax havens to the literature on asymmetric information. I
argue that the core aim of tax haven legislation is to create private
information (secrecy) for the users of tax havens. This leads to moral
hazard and transaction costs in non-havens. The business model of tax
havens is illustrated by using Mauritsius and Jersey as case studies. I
also provide several real world examples of how secrecy jurisdictions lead
to inefficient market outcomes and breach of regulations in non-haven
countries. Both developed and developing countries are harmed, but the
consequences seem most detrimental to developing countries.
Keywords: Tax havens; secrecy; private information; moral hazard; (follow links to similar papers)
JEL-Codes: F23; H25; O10; (follow links to similar papers)
25 pages, March 10, 2015
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