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Offshore schemes and tax evasion: The role of banks

Lucy Chernykh and Sergey Mityakov

Journal of Financial Economics, 2017, vol. 126, issue 3, 516-542

Abstract: We use mandatory Russian banks’ reports to the Central Bank to construct a novel measure of offshore-banking. Individual bank involvement in offshore operations is calculated as a fraction of total transactions with foreign countries that go through offshore financial centers. We find that offshore-active banks perform less financial intermediation and focus more on international wire transfers. We show a positive relation between banks’ offshore activities and tax evasion of companies doing business through these banks. Finally, we show that the Central Bank eventually responds to this behavior: offshore-active banks have higher likelihood of license revocation and criminal investigation against top-management.

Keywords: Financial institutions; Offshore banking; Tax evasion (search for similar items in EconPapers)
JEL-codes: G21 G38 H26 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1016/j.jfineco.2017.09.004

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