Hidden Havens: State and Local Governments as Tax Havens?

No 10573, CESifo Working Paper Series from CESifo

Abstract: An international tax haven is usually a low-tax jurisdiction that seeks to attract investment by foreign investors. But, there are many state and local jurisdictions within federal systems that set zero tax rates on personal or corporate income, consumption, property, and wealth in an effort to attract activity from other high-tax jurisdictions. I discuss whether subnational tax havens are distinct from intense tax competition. I conclude that in a federal system, the economic implications of the two may be similar, but the policy responses differ subtly. A survey of the empirical evidence on the effect of zero or very low tax rates indicates that the lowest tax jurisdiction may disproportionately benefit from non-real base shifting, but real and avoidance responses also arise in response to smaller tax differentials between non-havens. Turning to the corporate income tax, I discuss how legal rules such as formula apportionment, economic nexus, and incorporation rules influence tax competition and the avoidance behaviors of multistate companies.

Keywords: tax haven; tax competition; state and local public finance; regulatory competition; corporate charters (search for similar items in EconPapers)
JEL-codes: H71 H73 H77 K22 K34 R51 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-acc, nep-law, nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10573

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