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Hidden Treasure: The Impact of Automatic Exchange of Information on Cross-Border Tax Evasion
Author: Sebastian Beer, Maria Delgado Coelho, and Sebastien Leduc
Series:
IMF Working Papers
Volume/Issue:
Volume 2019: Issue 286
Language:
English
Publication Date:
20 Dec 2019
DOI:
https://doi.org/10.5089/9781513519975.001
ISBN:
9781513519975
ISSN:
1018-5941
Pages:
32
Keywords:
WP; bank deposit; EOI agreement; tax evasion; exchange of information; cross-border deposits; treatment effect; offshore center; biases result; standard error; Anti-money laundering and combating the financing of terrorism (AML/CFT); Offshore financial centers; Double taxation; Personal income tax; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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We analyze the impact of exchange of information in tax matters in reducing international tax evasion between 1995 and 2018. Based on bilateral deposit data for 39 reporting countries and more than 200 counterparty jurisdictions, we find that recent automatic exchange of information frameworks reduced foreign-owned deposits in offshore jurisdictions by an average of 25 percent. This effect is statistically significant and, as expected, much larger than the effect of information exchange upon request, which is not significant. Furthermore, to test the sensitivity of our findings, we estimate countries’ offshore status and the impact of information exchange simultaneously using a finite mixture model. The results confirm that automatic (and not upon request) exchange of information impacts cross-border deposits in offshore jurisdictions, which are characterized by low income tax rates and strong financial secrecy.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund