Tax Arbitration Through Offshore Centres аnd Tax Havens

Authors: A. S. Dirva, ORCID ID 0000000299482577, PhD Student, The Faculty of International Business and Economics, The Bucharest University of Economic Studies, Bucharest, Romania
C. Dirva, ORCID ID 0000000226438487, PhD Student, The Faculty of International Business and Economics, The Bucharest University of Economic Studies, Bucharest, Romania

Abstract: The aim of the study is to capture the most relevant aspects regarding the functioning of offshore centres and tax havens, focusing in particular on the most important conceptual and instrumental cla rifications. There are several angles to approach the phenomenon of tax evasion that are pointed out in this article, alongside a comparison of various analytical perspectives and, based on these, a number of judgments regarding their (in)opportunity are issued. In order to make a consistent description of the tax havens, it is necessary to clarify the fundamentals, the specific determinants and the factors without which these structures could not exist in the first place, the main hypothesis being that the boundary between tax arbitration and tax evasion is highly ambiguous and this is the major rationale why polemics on this topic arise. The goal is to present as objectively as possible these offshore centres and tax havens activities, which are paramount financial centres, irrespective of the criticism made by those who deem them unfair, immoral or even evil, as well as dangerous. This article focuses on tax planning and tax arbitration practices (e.g., “treaty shopping”), concluding with a collection of rationales for a balanced view on fiscal competition.

Key words: cross-border transaction, capital mobility, offshore financial centres, tax havens, tax planning, fiscal competition

Received: 14/02/19

1st Revision: 21/03/19

Accepted: 20/04/19



Avi-Yonah, R. S., 2000. Globalization, Tax Competition and the Fiscal Crisis of the Welfare State. Harvard Law Review, 113 (7), pp. 1573–1676,
Boyle, M., 2005. Cross-Border Tax Arbitrage – Policy Choices and Political Motivations. British Tax Review, 5, pp. 527–543.
Clausing, K. A., 2009. Multinational Firm Tax Avoidance and Tax Policy. National Tax Journal, 62 (4), pp. 703–725,
Desai, M. A., 2003. The Divergence between Book Income and Tax Income. National Bureau of Economic Research,
Engel, E., Erickson, M., and Maydew, E. L., 1999. Debt-Equity Hybrid Securities. Journal of Accounting Research, 37 (2), pp. 249– 274,
Erickson, M., Goolsbee, A., and Maydew, E. L., 2002. How Prevalent Is Tax Arbitrage? Evidence from the Market for Municipal Bonds. National Tax Journal, 56 (1), pp. 259-270,
Fama, E. F., and French, K.R., 1998. Taxes, Financing Decisions, and Firm Value. The Journal of Finance, 53 (3), pp. 819–843,
Fuest, C., and Riedel, N., 2010. Tax Evasion and Tax Avoidance in Developing Countries. Oxford University Centre for Business Taxation, Working Paper 10/12,
Graham, J. R., 1996. Debt and the Marginal Tax Rate. Journal of Financial Economics, 41 (1), pp. 41–73,
Graham, J. R., 2003. Taxes and Corporate Finance: A Review. The Review of Financial Studies, 16 (4), pp. 1075–1129,
Hampton, M., 1996. The Offshore Interface: Tax Havens in the Global Economy. London: St. Martin Press,
Henry, J., 2012. The Price of Offshore Revisited. Tax Justice Network.
Jora, O. D., 2014. Anotimpurile economiei la pamanteni. Jurnal de boom <U+0219>i bust (2003-2010). Bucure<U+0219>ti: Editura ASE.
Jora, O. D., 2018. Liberul arbitru fluiera antijoc. Jurnal de economie <U+0219>i politica (2011-2018). Bucure<U+0219>ti: Editura ASE.
Krishna, V., 2009. Using Beneficial Ownership to Prevent Treaty Shopping. Tax Notes International, 56 (7), pp. 537–550.
Mackie<U+2010>Mason, J.K., 1990. Do Taxes Affect Corporate Financing Decisions? The Journal of Finance, 45 (5), pp. 1471–1493,
Miller, M., 1977. Debt and Taxes. Journal of Finance 32 (2), pp. 261–275,
Mitchell, D. J. 2008. Heavenly Tax Havens [online]. Available at: < havens> [Accessed 1 October 2018].
Mitchell, D. J. 2013. Tax Havens Are Good for High-Tax Nations [online]. Available at: < good-high-tax-nations> [Accessed 1 October 2018].
Nielsen, N., 2017. European Banks Stashing Billions in Tax Havens. EUobserver [online], 27 March. Available at:
<> [Accessed 1 October 2018].
Palan, R., and Chavagneux, C., 2007. Les paradis fiscaux. Paris: La Decouverte.
Palan, R., Murphy, R., and Chavagneux, C., 2010. Tax Havens: How Globalization Really Works. New York: Cornell University.
Palan, R., Murphy, R., Chavagneux, C., and Mousli, M., 2009. Les paradis fiscaux: entre evasion fiscale, contournement des regles et inegalites mondiales. Paris: L’economie politique,
Rosenbloom, H. D., 2000. International Tax Arbitrage and the International Tax System. Tax Law Review, 53 (2), pp. 137–166.
Shaxson, N., 2011. Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens. New York: Palgrave Macmillan.
Starchild, A., 1994. Tax Havens for International Business. London: Macmillan Press,
Zorome, A., 2007. Concept of Offshore Financial Centers: In Search of an Operational Definition. IMF Working Paper 07/87,
Zucman, G., 2016. The Hidden Welfare of Nations:The Scourge of Tax Havens. Chicago: University of Chicago Press,
The New York Convention, 1982. Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 3 (codified at 9 U.S.C. §§ 201-208),
<> [Accessed 1 October 2018].
IMF, 2000. Offshore Financial Centers [online]. Available at: <> [Accessed 1 October 2018].
OECD, 1998. Harmful Tax Competition: An Emerging Global Issue. OECD Publishing [online]. Available at: <https://read.oecd-> [Accessed 1 October 2018].
OECD, 2013. Addressing Base Erosion and Profit Shifting. OECD Publishing [online]. Available at: <https://read.oecd-> [Accessed 1 October 2018].
OECD, 2017. Brief on the State of Play on the International Tax Transparency Standards [online]. Available at:
<> [Accessed 1 October 2018].