TY - JOUR
T1 - Tax Havens and Tourism
T2 - The Impact of the Panama Papers and the Crowding Out of Tourism by Financial Services
AU - Cao, Zheng Chris
AU - Jones, Chris
AU - Temouri, Yama
N1 - Publisher Copyright:
© The Author(s) 2023.
PY - 2024/4
Y1 - 2024/4
N2 - Tax havens are often connected to growth in tourism, as finance and tourism conveniently share infrastructural prerequisites. This paper addresses the detrimental impacts of a tax haven development strategy adopted by small open economies in relation to the development of their tourism industry. Utilizing the synthetic control method, we find that since the 2016 Panama Papers scandal, Panama’s tourism exports have fallen relative to an estimated counterfactual level that would have otherwise been attained. Moreover, based on an analysis of panel data drawn from 20 small open economies, we find that in the long run, the growth of the financial industry crowds out the tourism industry. Our findings warn tourism practitioners, based in tax havens, that they face an additional risk linked to potential tax scandals. Furthermore, the tourism industry may suffer reputational harm due to tax haven blacklisting and the crowding out of productive resources by the financial industry.
AB - Tax havens are often connected to growth in tourism, as finance and tourism conveniently share infrastructural prerequisites. This paper addresses the detrimental impacts of a tax haven development strategy adopted by small open economies in relation to the development of their tourism industry. Utilizing the synthetic control method, we find that since the 2016 Panama Papers scandal, Panama’s tourism exports have fallen relative to an estimated counterfactual level that would have otherwise been attained. Moreover, based on an analysis of panel data drawn from 20 small open economies, we find that in the long run, the growth of the financial industry crowds out the tourism industry. Our findings warn tourism practitioners, based in tax havens, that they face an additional risk linked to potential tax scandals. Furthermore, the tourism industry may suffer reputational harm due to tax haven blacklisting and the crowding out of productive resources by the financial industry.
KW - crowding out
KW - synthetic control method
KW - tax havens
KW - the Panama Papers
KW - tourism development
UR - http://www.scopus.com/inward/record.url?scp=85162979982&partnerID=8YFLogxK
U2 - 10.1177/00472875231179395
DO - 10.1177/00472875231179395
M3 - Article
AN - SCOPUS:85162979982
SN - 0047-2875
VL - 63
SP - 841
EP - 857
JO - Journal of Travel Research
JF - Journal of Travel Research
IS - 4
ER -