We assess the European Union’s (EU) most significant international tax policy. The 2005 Tax and Savings Directive obliges cooperating jurisdictions to withhold tax or report on interest income earned by entities whose beneficial owner is an EU resident. As the Directive applies only to beneficial ownership in cooperative jurisdictions, it can be circumvented by transferring ownership to a non-EU resident or company or by transferring the entity to a non-cooperative jurisdiction. Using a database on individual offshore entities leaked from two firms in 2013, we compare the response of EU-owned entities with a control group of non-EU-owned entities. We show that the growth of EU-owned entities declined immediately after the Directive’s implementation, whereas that of non-EU-owned entities remained stable. We observe the substitution of EU ownership for non-EU ownership, as well as the substitution of cooperative for non-cooperative offshore jurisdictions. This calls for anti-evasion policies that are broader in scope and scale.

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What if a colony is neither extractive nor settler material? European powers colonized some areas for military reasons: to keep those areas out of rivals' hands or to have geographically strategic outposts. In these cases, European settlement was low and there was nothing to extract. This article examines the extent to which living standards, as measured by real wages, among three such examples-Cyprus, Gibraltar, and Malta-can be explained by British rule. These highly comparable Mediterranean islands did not enjoy democratic governments nor did they endure authoritarian ones. Colonial institutions worked through ensuring an environment in which Mediterranean trade could flourish. This adds another layer to our understanding of the economic impact of colonization, extending the simple settler versus extractive dichotomy. It also contradicts the historiography's claims that living standards were low, and determined by British military expenditure. Living standards in these countries were in fact at the European average. E ver since the work of Acemoglu, Johnson, and Robinson, the settler colony versus extractive colony dichotomy has typified research on the economic legacy of European colonialism. 1 According to this dichotomy, in places where endowments made it profitable to set up extractive colonies, authoritarian political regimes were established, few Europeans settled, and subsequent development was poor-as with gold and labour-rich parts of Latin America. In places where endowments encouraged European settlement, colonizers established egalitarian political institutions that paved the way for economic development-as with temperate, sparsely populated North America. Further empirical work has shown this dichotomy is a powerful explanation of institutional quality and hence development over the long run. 2 What if a colony is neither extractive nor settler material, and what about the contemporaneous effects of colonial institutions? European powers often colonized areas for purely military reasons: to keep those areas out of the hands of rivals or to have geographically strategic outposts. In these cases, European