Hidden Treasure: The Impact of Automatic Exchange of Information on Cross-Border Tax Evasion
IMF Working Papers, December 20, 2019
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- Hidden Treasure: The Impact of Automatic Exchange of Information on Cross-Border Tax Evasion
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Bibliographic details
- Authors: Sebastian Beer, Maria Delgado Coelho, Sebastien Leduc
- Published: December 20, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513519975.001
Summary findings
- Study period: between 1995 and 2018.
- Data: bilateral deposit data for 39 reporting countries and more than 200 counterparty jurisdictions.
- Main finding: recent automatic exchange of information frameworks reduced foreign-owned deposits in offshore jurisdictions by an average of 25 percent.
- Comparison of modalities: the effect of automatic exchange of information is statistically significant; the effect of information exchange upon request is not significant.
- Robustness: simultaneous estimation of countries’ offshore status and the impact of information exchange using a finite mixture model confirms that automatic (and not upon request) exchange of information impacts cross-border deposits in offshore jurisdictions.
- Characterization of affected jurisdictions: offshore jurisdictions are described as having low income tax rates and strong financial secrecy.
Methodology and analytical approach
- Empirical scope: bilateral deposit data covering 39 reporting countries and more than 200 counterparty jurisdictions over 1995–2018.
- Econometric approach: finite mixture model used to estimate countries’ offshore status and the impact of information exchange simultaneously to test sensitivity of findings.
- Treatment comparison: automatic exchange of information frameworks versus exchange of information upon request.
Policy implications and themes
- Automatic exchange of information is effective at reducing cross-border tax evasion as measured by reductions in foreign-owned deposits in offshore jurisdictions.
- Exchange of information upon request shows no significant impact on cross-border deposits in this analysis.
- Targeting jurisdictions characterized by low income tax rates and strong financial secrecy can be effective when implementing automatic information-exchange frameworks.
Source: IMF Working Paper "Hidden Treasure: The Impact of Automatic Exchange of Information on Cross-Border Tax Evasion", Sebastian Beer, Maria Delgado Coelho, and Sebastien Leduc, Working Paper No. 2019/286 (December 20, 2019).
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