"Paraísos fiscales", wealth taxation, and mobility

David Agrawal, Dirk Foremny and Clara Martínez-Toledano ()
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Clara Martínez-Toledano: Columbia Business School

No 2020/15, Working Papers from Institut d'Economia de Barcelona (IEB)

Abstract: This paper analyzes the effect of wealth taxation on mobility and the consequences for tax revenue and wealth inequality. We exploit the unique decentralization of the Spanish wealth tax system in 2011—after which all regions levied positive tax rates except for Madrid—using linked administrative wealth and income tax records. We find that five years after the reform, the stock of wealthy individuals in the region of Madrid increases by 10% relative to other regions, while smaller tax differentials between other regions do not matter for mobility. We rationalize our findings with a theoretical model of evasion and migration, which suggests that evasion is the mechanism most consistent with all of the mobility response being driven by the paraíso fiscal. Combining new subnational wealth inequality series with our estimated elasticities, we show that Madrid’s status as a tax haven reduces the effectiveness of raising tax revenue and exacerbates regional wealth inequalities.

Keywords: Wealth Taxes; Mobility; Inequality; Enforcement; Fiscal Decentralization; Tax Havens; Evasion (search for similar items in EconPapers)
JEL-codes: E21 H24 H31 H73 J61 R23 (search for similar items in EconPapers)
Pages: 91 pages
Date: 2020
New Economics Papers: this item is included in nep-iue, nep-mac, nep-pbe and nep-ure
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Citations: View citations in EconPapers (9)

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https://ieb.ub.edu/publication/2020-15-paraisos-fi ... xation-and-mobility/ (application/pdf)

Related works:
Working Paper: Paraísos Fiscales, Wealth Taxation, and Mobility (2020)
Working Paper: Paraísos Fiscales, Wealth Taxation, and Mobility (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ieb:wpaper:doc2020-15

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