What do External Statistics tell us About Undeclared Assets held Abroad and Tax Evasion?

51 Pages Posted: 15 Feb 2017

Date Written: November 24, 2016

Abstract

The analysis of international investment position and balance of payments statistics suggests that foreign assets held abroad are greatly underestimated. This paper has three main goals. First, it examines the role played by tax havens in tax evasion. Second, it estimates unreported capital to range globally between $6 trillion and $7 trillion at end-2013, on the basis of mirror statistics on portfolio securities and on cross-border deposits of non-banks. Third, it estimates the portion of tax evasion connected to the under-reporting of foreign assets to range between $20 billion and $42 billion a year over the period 2001-2013 for capital income tax, and between $2.1 trillion and $2.8 trillion at end-2013 for personal income tax. The estimate for personal income tax is based on the assumption that the entire stock of unreported capital outstanding at end-2013 was made up of income that had escaped income tax. Finally, the paper gives a critical assessment of the strengths and weaknesses of the recent policy responses to international tax evasion.

Keywords: tax evasion, tax haven, international investment, foreign investment, multinational firm, offshore, foreign assets, under-reporting

JEL Classification: H26, F21, F23, G15

Suggested Citation

Pellegrini, Valeria and Sanelli, Alessandra and Tosti, Enrico, What do External Statistics tell us About Undeclared Assets held Abroad and Tax Evasion? (November 24, 2016). Bank of Italy Occasional Paper No. 367. Available at SSRN: https://ssrn.com/abstract=2917184 or http://dx.doi.org/10.2139/ssrn.2917184

Valeria Pellegrini (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Alessandra Sanelli

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Enrico Tosti

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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