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Department of Business and Management Science, Norwegian School of Economics (NHH) Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)

No 2015/12:
Secrecy Jurisdictions

Guttorm Schjelderup ()

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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