Taxing Capital in a Globalized World: The Effects of Automatic Information Exchange


In the mid-2010s more than 100 countries - including all large offshore financial centers started to automatically exchange bank information with foreign tax authorities. This informational big-bang marks a break with the situation of offshore bank secrecy that prevailed before. We study its effects on tax compliance by analyzing the universe of information reports sent by foreign banks to Danish authorities, matched to population-wide micro-data on income, wealth, and cross-border bank transfers. In response to the automatic exchange of bank information, tax evaders may repatriate previously undeclared offshore wealth, they may start to self-report offshore income to the tax authorities, or the tax authorities may detect their evasion in audits that use the new information reports. Using a variety of research designs, we estimate large compliance effects along all these margins, with the largest response coming from repatriation of wealth. We also find evidence of noncompliance by foreign banks and by taxpayers even in this new transparency regime, highlighting the limits of third-party information reporting when applied across borders. Overall our findings indicate that about two thirds of the offshore wealth that used to be hidden has come into compliance or become visible.


If you have any queries regarding the seminar, please contact the seminar organizers Katrine V. Løken, Heidi C. Thysen, Eirik G. Kristiansen or Helene Bjørndal Fosse.