Unlocking the gates of paradise: General equilibrium effects of information exchange

In a move to reduce bank secrecy and fight international tax evasion, about 100 tax jurisdictions have so far committed to implement a new standard on the Automatic Exchange of Information (AEoI). This paper examines the quantitative consequences of the AEoI for an onshore country, using a neoclassi...

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Bibliographic Details
Published in:Journal of economic dynamics & control 2018-02, Vol.87, p.152-172
Main Authors: Marchiori, Luca, Pierrard, Olivier
Format: Article
Language:English
Subjects:
Information exchange
International capital flows
Neoclassical model
Offshore center
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Summary:In a move to reduce bank secrecy and fight international tax evasion, about 100 tax jurisdictions have so far committed to implement a new standard on the Automatic Exchange of Information (AEoI). This paper examines the quantitative consequences of the AEoI for an onshore country, using a neoclassical model with an offshore financial center. Our main findings are (i) the AEoI increases government revenues but reduces welfare; (ii) welfare improves when using the AEoI revenues to reduce tax pressure or when including household wealth inequality; (iii) government revenues increase further when accounting for a disclosure penalty cost. These results depend on the general equilibrium effects, absent from earlier papers on offshore financial centers.
ISSN:0165-1889
1879-1743
DOI:10.1016/j.jedc.2017.12.006