Do changes in the Capital Gains Tax lead to illicit capital flows? Evidence from Ireland

Fabian Möller

Applied Economics Letters, 2025, vol. 32, issue 4, 454-459

Abstract: In 2008, Ireland raised its Capital Gains Tax for the first time in 10 years. Interestingly, this coincides with a trend reversal of illicit capital flows, measured by Net Trade Misinvoicing (NTMI). In a sample from 1998 to 2022, we document that, more generally, there exists a significant partial correlation between the Irish Capital Gains Tax, relative to that in the United States, and NTMI. When measuring illicit flows by the World Bank Residual and the Net Errors and Omissions Method, however, this correlation is not significant and other factors, including variables that capture the financial crisis, are more important.

Date: 2025
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DOI: 10.1080/13504851.2023.2275215

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