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Abstract
The ability of multinationals to avoid taxes by shifting profits to tax havens has
drawn increasing criticism on both revenue and equity grounds. Using a staggered difference-in-differences approach and matched Norwegian employer-employee data, we show that haven-using firms pay higher compensation. This is particularly apparent in services where the haven pay premium is nearly 2%. Further, there is substantial within-firm heterogeneity with high-skill occupations earning higher premia. These estimates suggest that income inequality growth would have been 13% lower without havens. Finally, we estimate that higher employee tax payments offset 8% of the corporate tax loss due to haven use.