Tax Information Exchange with Developing Countries and Tax Havens

31 Pages Posted: 4 Nov 2015

See all articles by Julia Braun

Julia Braun

Vienna University of Economics and Business - Department of Economics; ZEW – Leibniz Centre for European Economic Research

Martin Zagler

Vienna University of Economics and Business - Department of Economics; University of Piemonte Orientale - Facoltà di Economia

Date Written: September 30, 2015

Abstract

The exchange of tax information has received ample attention recently, due to a number of recent headlines on aggressive tax planning and tax evasion. Whilst both participating tax authorities will gain when foreign investments (FDI) are bilateral, we demonstrate that FDI receiving nations will lose in asymmetric situations. We solve a bargaining model that proves that tax information exchange will only happen voluntarily with compensation for this loss. We then present empirical evidence in a global panel and find that a tax information exchange agreement (TIEA) or a double tax treaty with information exchange (DTT) is more likely when the capital importer is compensated through official development assistence (ODA). We finally demonstrate how the foreign account tax compliance act (FATCA) and similar international initiatives bias the bargaining outcome in favour of capital exporting countries.

Keywords: developing countries, tax havens, tax information exchange agreements

JEL Classification: K33, F53, H25, H87, D82

Suggested Citation

Braun, Julia and Zagler, Martin, Tax Information Exchange with Developing Countries and Tax Havens (September 30, 2015). WU International Taxation Research Paper Series No. 2015 - 25. Available at SSRN: https://ssrn.com/abstract=2683551 or http://dx.doi.org/10.2139/ssrn.2683551

Julia Braun

Vienna University of Economics and Business - Department of Economics ( email )

Welthandelsplatz 1
A-1020 Wien
Austria

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Martin Zagler (Contact Author)

Vienna University of Economics and Business - Department of Economics ( email )

Augasse 2-6
A-1090 Wien
Austria

University of Piemonte Orientale - Facoltà di Economia ( email )

Via Perrone, 18
Novara, 28100
Italy

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