Tax Havens and their Impact on the US Economy

Tax havens are usually small nation states that offer very low taxation and banking secrecy in order to attract funds from other countries. Many of these tax havens, or offshore financial centres, are tiny islands that are incapable of absorbing the huge flows of funds which have been transferred into them for direct investment into their own economies and funds which are stored in tax havens end up being invested elsewhere provided that they are generating competitive rates of return. About seventy countries around the world have been classified as tax havens and the list includes Belize, Cayman Island, Barbados, British Virgin Island, Nauru as well as Bahamas. Bankers and financial institutions find these locations attractive because the governments in these states are weak and it is not possible to regulate or coerce financial institutions into making decisions. This dissertation examines the impact of tax havens on the US economy.