The business model of tax havens is under pressure: The role of trust and coordination

Tax havens attract investors by promising to not reveal information about accrued capital income, and thereby facilitating tax evasion. Convincing tax havens to participate in an exchange of information by exerting political pressure is difficult as they derive substantial benefits from the wealth management business. A study at the Max Planck Institute for Tax Law and Public Finance shows how the tax havens’ business model relies on trust between a tax haven and its investors as well as among the many individual investors, and how a disruption of trust can create additional transparency.