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Offshore Schemes and Tax Evasion: The Role of Banks

105 Pages Posted: 20 Jul 2015 Last revised: 30 Jan 2017

Lucy Chernykh

Clemson University

Sergey Mityakov

Clemson University - John E. Walker Department of Economics

Date Written: December 4, 2016

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: Tax evasion, offshore schemes, banks

JEL Classification: G21, H26

Suggested Citation

Chernykh, Lucy and Mityakov, Sergey, Offshore Schemes and Tax Evasion: The Role of Banks (December 4, 2016). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2633031 or http://dx.doi.org/10.2139/ssrn.2633031

Lucy Chernykh

Clemson University ( email )

School of Accountancy and Finance
Clemson, SC 29634
United States

Sergey Mityakov (Contact Author)

Clemson University - John E. Walker Department of Economics ( email )

Clemson, SC 29634
United States

HOME PAGE: http://people.clemson.edu/~smityak/

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