Taxing Capital in a Globalized World: The Effects of Automatic Information Exchange

Hjalte Fejerskov Boas (), Niels Johannesen (), Claus Thustrup Kreiner (), Lauge Larsen () and Gabriel Zucman ()
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Hjalte Fejerskov Boas: University of Copenhagen
Niels Johannesen: Oxford University and University of Copenhagen
Claus Thustrup Kreiner: University of Copenhagen
Lauge Larsen: University of Copenhagen
Gabriel Zucman: Paris School of Economics and UC Berkeley

No 24, Working Papers from EU Tax Observatory

Abstract: In the second half of the 2010s more than 100 countries — including all large offshore financial centers — started to automatically exchange bank information with foreign tax authorities. This informational big-bang marks a break with the situation of offshore bank secrecy that prevailed before. We study its effects on tax compliance by analyzing the universe of information reports sent by foreign banks to Danish authorities, matched to population-wide micro-data on income, wealth, and cross-border bank transfers. In response to the automatic exchange of bank information, tax evaders may repatriate previously undeclared offshore wealth, they may start to self-report offshore income to the tax authorities, or the tax authorities may detect their evasion in audits that use the new information reports. Using a variety of research designs, we find large compliance effects along all these margins, with the largest response coming from repatriation of wealth. Overall we estimate that the automatic exchange of bank information has closed about 70% of the offshore tax gap. These results highlight the power of international cooperation to improve tax compliance: tax evasion is not a law of nature in a globalized world.

Keywords: Automatic exchange of information; offshore tax evasion; tax compliance; repatriation of wealth (search for similar items in EconPapers)
JEL-codes: D31 H24 H26 K34 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2024-07
New Economics Papers: this item is included in nep-iue
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