Hidden Wealth and Automatic Information Sharing

Andrew Belnap, Jacob Thornock and Braden Williams

Journal of Law and Economics, 2024, vol. 67, issue 4, 905 - 949

Abstract: In recent years, governments across the globe have implemented automatic information-sharing measures as a revolutionary tool to combat offshore tax evasion. Using hand-collected and private Internal Revenue Service data on participation in the Foreign Account Tax Compliance Act, we provide some of the first evidence of the costs and quality of information shared via automatic information sharing. We estimate that the aggregate costs borne by foreign financial institutions (FFIs) were $31–$52 billion. Furthermore, although 97 percent of FFIs have committed to sharing information with US tax authorities, there is significant variation in quality. Quality is lower for accounts held by business entities and by firms with more offshore US accounts but higher for accounts in tax havens, treaty countries, and countries with a model 1 intergovernmental agreement. Our findings suggest that, despite US efforts to induce FFIs to share information, opportunities remain for hiding wealth abroad.

Date: 2024
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