Bank deposits in offshore financial centers may be used to evade taxes on interest income. A recent EU reform limits the scope for this type of tax evasion by introducing a withholding tax on interest income earned by EU households in Switzerland and several other offshore centers. This paper...

This paper develops a model where firms can shift profits to tax havens by means of intra-firm loans and countries can protect themselves against profit shifting by taxing cross-border interest flows. The model considers two countries with a scope for welfare improving economic integration. The...