Information Exchange and Tax Haven Investment in OECD Securities Markets

43 Pages Posted: 1 Sep 2017 Last revised: 16 Mar 2018

See all articles by Jost H. Heckemeyer

Jost H. Heckemeyer

University of Kiel - Faculty of Economics and Social Sciences; ZEW – Leibniz Centre for European Economic Research

Aaron K. Hemmerich

University of Kiel; Leibniz Universität Hannover - Faculty of Economics and Management

Date Written: March 8, 2018

Abstract

Curtailing tax evasion is high on the international policy agenda. Still, there is only little empirical evidence about the effects of offshore tax evasion in cross-border portfolio investment and its responsiveness to changes in enforcement. Exploiting rich IMF data on bilateral investments in OECD securities markets, we show that outbound portfolio investment (FPI) from tax haven countries is significantly more responsive to information exchange than outbound FPI from non-havens. This is strong evidence for a tax evasion component in tax haven investment in OECD securities markets. Furthermore, we are able to show that tax havens’ attempts to undermine the OECD transparency initiative pay off. Tax havens that enter into information exchange with other tax havens rather than with non-haven partner countries become more attractive pass-through destinations for tax evaders.

Keywords: Tax Havens, Tax Evasion, Portfolio Investment, Tax Information Exchange, Offshore Funds

JEL Classification: F21, F32, G15, H26, H87, K42

Suggested Citation

Heckemeyer, Jost H. and Hemmerich, Aaron K., Information Exchange and Tax Haven Investment in OECD Securities Markets (March 8, 2018). Available at SSRN: https://ssrn.com/abstract=3029219 or http://dx.doi.org/10.2139/ssrn.3029219

Jost H. Heckemeyer

University of Kiel - Faculty of Economics and Social Sciences ( email )

Kiel
Germany

ZEW – Leibniz Centre for European Economic Research ( email )

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

Aaron K. Hemmerich (Contact Author)

University of Kiel ( email )

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany

Leibniz Universität Hannover - Faculty of Economics and Management ( email )

Welfengarten 1
D-30167 Hannover, 30167
Germany

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