Cash-strapped governments around the world may be in line for a boost from two unlikely sources: the Cayman Islands and Liechtenstein. Both countries, deemed big-time tax shelters, are tightening rules in a move that could prompt companies to stay home and pay taxes rather than lay down roots in cheaper offshore locales.

The U.S. alone reportedly loses $100 billion a year in tax revenue to shell companies and bank accounts registered in far-flung tax havens. The financial world, on the other hand, reaps enormous benefits: Three quarters of the world’s 8,000 biggest hedge funds are domiciled in the Cayman Islands, for example, helping to make that territory of 49,000 souls a top-ten global banking center. ....

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