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Unlocking the gates of paradise: General equilibrium effects of information exchange

Luca Marchiori and Olivier Pierrard

Journal of Economic Dynamics and Control, 2018, vol. 87, issue C, 152-172

Abstract: In a move to reduce bank secrecy and fight international tax evasion, about 100 tax jurisdictions have so far committed to implement a new standard on the Automatic Exchange of Information (AEoI). This paper examines the quantitative consequences of the AEoI for an onshore country, using a neoclassical model with an offshore financial center. Our main findings are (i) the AEoI increases government revenues but reduces welfare; (ii) welfare improves when using the AEoI revenues to reduce tax pressure or when including household wealth inequality; (iii) government revenues increase further when accounting for a disclosure penalty cost. These results depend on the general equilibrium effects, absent from earlier papers on offshore financial centers.

Keywords: Offshore center; Information exchange; International capital flows; Neoclassical model (search for similar items in EconPapers)
JEL-codes: F21 H26 (search for similar items in EconPapers)
Date: 2018
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Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

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Handle: RePEc:eee:dyncon:v:87:y:2018:i:c:p:152-172