Hidden Treasure: The Impact of Automatic Exchange of Information on Cross-Border Tax Evasion

33 Pages Posted: 23 Jan 2020

See all articles by Sebastian Beer

Sebastian Beer

International Monetary Fund (IMF)

Maria Coelho

University of California, Berkeley, College of Letters & Science, Department of Economics

Seb Leduc

International Monetary Fund (IMF)

Date Written: December 2019

Abstract

We analyze the impact of exchange of information in tax matters in reducing international tax evasion between 1995 and 2018. Based on bilateral deposit data for 39 reporting countries and more than 200 counterparty jurisdictions, we find that recent automatic exchange of information frameworks reduced foreign-owned deposits in offshore jurisdictions by an average of 25 percent. This effect is statistically significant and, as expected, much larger than the effect of information exchange upon request, which is not significant. Furthermore, to test the sensitivity of our findings, we estimate countries' offshore status and the impact of information exchange simultaneously using a finite mixture model. The results confirm that automatic (and not upon request) exchange of information impacts cross-border deposits in offshore jurisdictions, which are characterized by low income tax rates and strong financial secrecy.

Keywords: Tax evasion, Tax revenue, Interest rate differential, Bank accounting, Financial institutions, exchange of information, cross-border deposits, WP, offshore jurisdiction, treatment effect, saver, evader, CRS

JEL Classification: H24, H26, G21, E01, H2, K34, H71

Suggested Citation

Beer, Sebastian and Coelho, Maria and Leduc, Seb, Hidden Treasure: The Impact of Automatic Exchange of Information on Cross-Border Tax Evasion (December 2019). IMF Working Paper No. 19/286. Available at SSRN: https://ssrn.com/abstract=3524307

Sebastian Beer (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Maria Coelho

University of California, Berkeley, College of Letters & Science, Department of Economics ( email )

Berkeley, CA
United States

Seb Leduc

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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