Information Exchange and Tax Haven Investment in OECD Securities Markets
43 Pages Posted: 1 Sep 2017 Last revised: 16 Mar 2018
Date Written: March 8, 2018
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: Suggested Citation