We study the short-term effect of the first global multilateral standard for the automatic exchange of information (AEOI), the so-called Common Reporting Standard (CRS), on cross-border tax evasion. ...Employing newly available bilateral data on cross-border deposits, we find that the CRS induced a reduction of 11.5% in cross-border deposits parked in tax havens. However, despite the 4000 bilateral information exchange relations created under the CRS, deposit relocation is still an option for secrecy-seeker. We find that the United States, which did not commit to the CRS, emerges as an attractive location for cross-border deposits.
•Increasing the information exchange between countries represents a key policy tool to fight cross-border tax evasion•We study the short-term effect of the Common Reporting Standard (CRS)•The CRS is the first global multilateral standard for the automatic exchange of information.•We show a drop in cross-border deposits held through traditional tax havens after the passage of the CRS laws•We document an increase of cross-border deposits held in the United States around the time when the CRS took effect
Abstract
The Foreign Account Tax Compliance Act (FATCA) spurred an unprecedented increase in the IRS’s ability to obtain information about assets held and income earned by US persons in foreign ...financial accounts, which were especially prone to illegal tax evasion. We review the evidence on FATCA’s efficacy at reducing tax evasion through foreign accounts and provide additional, longer-term evidence. We then discuss potential avenues for avoiding FATCA reporting. We also highlight other consequences of FATCA and provide exploratory analyses pointing to the use of the United States as a tax haven for foreign investors. We conclude with policy recommendations and suggestions for future research in areas where more analysis is needed.
Tax Treaty is a bilateral(two-party) agreement made by two or more than two countries to resolve some issues involving double taxation, transfer pricing, and treaty shopping. Several governments and ...organizations use model treaties generally as starting points, such as OECD Model Convention and US Model Convention. As a member of G20, Indonesia has participated in The Automatic Exchange of Information (AEoI) provides for the automatic exchange of predefined set of financial accounts information between tax authorities, based on The Common Reporting Standard (CRS), as also mentioned in Tax Information Exchange Agreement (TIEA) implemented in 2018. In order to implement AEoI the Indonesian regulator needs to review the Banking Law and the Tax Provisions and Procedures, There is an urgent need to regulate a regulation as a standard that will be used in CSR, support the tax reform and to enhance the capacity and the authority of Directorate General of Taxation, Ministry of Finance and Financial Services Authority, while still considering the protection for the Bank Secrecy. This research will formulate a model regulation that can facilitate the implementation of the AEoI, by carrying out a study in 3 countries, which is Indonesia, Malaysia and Singapore
ABSTRACT
We examine how U.S. individuals respond to regulation intended to reduce offshore tax evasion. The Foreign Account Tax Compliance Act (FATCA) requires foreign financial institutions to ...report information to the U.S. government regarding U.S. account holders. We first document an average $7.8 billion to $15.3 billion decrease in equity foreign portfolio investment to the United States from tax‐haven countries after FATCA implementation, consistent with a decrease in “round‐tripping” investments attributable to U.S. investors’ offshore tax evasion. When testing total worldwide investment out of financial accounts in tax havens post‐FATCA, we find an average decline of $56.6 billion to $78.0 billion. We next provide evidence of other important consequences of this regulation, including increased expatriations of U.S. citizens and greater investment in alternative assets not subject to FATCA reporting, such as residential real estate and artwork. Our study contributes to both the academic literature and policy analysis on regulation, tax evasion, and crime.
Purpose of this study is to determine the legal consequences of the implementation of Automatic Exchange of Information related to bank secrecy and to determine the form of legal protection for ...taxpayers after the implementation of Automatic Exchange of Information. The author uses a normative juridical research method as well as aapproach statute and a conceptual approach. From the research results, it can be concluded that the implementation of the Automatic Exchange of Information does not completely override bank secrecy norms, but only requires financial services institutions to provide financial information for depositors and their deposits in accordance with established regulations, and the enforcement of these rules is solely for tax purposes. and not for other purposes, so that outside of taxation purposes, the regulations protecting bank secrecy are still valid. And the form of legal protection provided by the government to taxpayers is in the form of statutory regulations that still guarantee bank secrecy outside of taxation interests, that access to data opening is only given to certain officials of the Directorate General of Taxes so that confidentiality can be more guaranteed and the government will provide criminal sanctions. for officials who leak the data in accordance with the prevailing laws and regulations.
After decades of ineffective attempts to fight tax evasion, the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS) recently implemented the first encompassing ...international exchange of tax-related information on an automatic basis. This is an important development because tax evasion contributes to rising socio-political inequality and political sovereignty losses. This article assesses the treaties' impact on tax evasion by conducting a difference-in-difference analysis of cross-border asset data. The results show that the treaties are successful. Household assets in tax havens that are not hidden behind corporate identities are estimated to be 67 per cent lower than they would have been without automatic exchange of information. Furthermore, this reduction is not offset by an increase in treaty circumvention using identity concealment or asset shifting to non-compliant jurisdictions. FATCA and CRS thus implement the first effective international cooperation against tax evasion. The results imply that political globalisation is capable to mitigate the political sovereignty losses and rise of inequality caused by economic globalisation.
The downward trend in capital taxes since the 1980s has recently reversed for personal capital income. At the same time, it continued for corporate profits. Why have these tax rates diverged after a ...long period of parallel decline? We argue that the answer lies in different levels of change in the fights against tax evasion and tax avoidance. The fight against evasion by households progressed significantly since 2009, culminating in the multilateral adoption of automatic exchange of information (AEI). In contrast, international efforts against base erosion and profit shifting (BEPS) failed to curb tax avoidance by corporations. We theorize that international cooperation is an intervening variable, countering the negative impact of tax competition on capital taxation by reducing the risk of capital flight. Under such conditions, domestic political pressures in favor of higher capital taxes can unfold. We confirm our argument in a difference-in-difference analysis and through additional tests with data for up to 35 OECD countries from 2000-2017. Our central estimate suggests that the average tax rate on dividends in 2017 is 4.5 percentage points higher than it would have been absent international tax cooperation.
The multilateral adoption of the automatic exchange of information (AEI) on bank accounts held by nonresidents was a breakthrough in the fight against cross-border tax evasion, which led to a ...substantial reduction in the value of bank deposits and investment portfolios in traditional tax havens. However, there is suspicion that sophisticated tax evaders engage in regulatory arbitrage of AEI provisions. We examine whether two widely discussed secrecy schemes, namely golden visas and anonymous trusts and shell corporations, have been used to circumvent information reporting. Relying on a difference-in-difference design, we only find scattered evidence for use of the secrecy schemes. Overall, our results suggest that regulatory arbitrage is not yet widespread, but it seems to increase over time. We thus provide evidence for the current effectiveness of the AEI but also show that closing remaining loopholes is of utmost importance. We link our findings to debates about the (im)possibility of re-embedding neoliberal globalization.
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