The Rich Get Richer: An Examination of Tax Haven Concentration and the New “Top 7”

ABSTRACT This study examines how separately analyzing tax haven countries according to country-level heterogeneity can produce different tax policy inferences. We focus on understanding tax havens with the largest impact on the U.S. corporate tax landscape by modernizing Hines and Rice’s (1994) “Big 7” classification, focusing on economic nexus. We identify seven tax havens (“Top 7”) holding a combined 81 percent of all U.S. public corporate tax haven subsidiaries in 2021. Top 7 havens offer a desirable combination of various nontax attributes, for example, strong governance, which signal economic stability and tax planning opportunities. We find the tax savings from tax haven operations are attributable to Top 7 haven use. Separating tax havens unmasks significant post-TCJA tax haven effects in foreign direct investment. Although these havens pose the largest public finance threat, we hope to further inform research to select tax havens according to a priori relevant characteristics. Data Availability: Data used in this study are available from publicly available sources or upon request. JEL Classifications: F3; G38; H20.