’Policies Against Tax Havens Are Successful’

Bermuda, the Cayman Islands: tax havens have been in the political and media spotlight for the past decade. The new book ’Research Handbook on the Economics of Tax Havens’, edited by Arjan Lejour and Dirk Schindler, sheds light on the practices of tax avoidance and evasion by corporations and individuals. It also demonstrates that international policies against tax avoidance are proving to be effective.

Governments are losing hundreds of billions of euros worldwide through tax avoidance. To combat this, the Netherlands is exchanging financial information with more than 100 countries since 2016. Financial institutions are required to report information about foreign account holders to the Dutch Tax and Customs Administration, which then shares these data with other tax authorities.

The new book Research Handbook on the Economics of Tax Havens demonstrates in several chapters that this international data exchange is effective in tackling tax avoidance. Increased transparency makes it harder for multinational companies to shift profits to tax havens without being detected, resulting in fairer taxation and strengthening global tax morale.

However, according to editor Arjan Lejour, Professor of Taxation and Public Finance at Tilburg University, the practice of tax havens is complex because it involves economic benefits as well as ethical and policy concerns. "The economies of tax havens thrive on facilitating tax avoidance and evasion, making it cheaper for multinationals and wealthy individuals to invest. On the flip side, the loss of tax revenue comes at the expense of public services in other countries. Effective countermeasures can only be achieved through international cooperation."

The handbook is aimed at academics, policymakers, and professionals, exploring tax havens from various disciplines, including economics, accountancy, political science, and tax law. It examines the mechanisms and consequences of corporate tax avoidance and individual income tax evasion, as well as the impact on national and global economies. The book analyzes unilateral measures against tax avoidance, such as Controlled Foreign Company (CFC) rules, and multilateral initiatives, including the global minimum tax rate of 15% for multinationals with annual revenues of at least €750 million.