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Tax evasion and Swiss bank deposits

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  • Johannesen, Niels

Abstract

Bank deposits in offshore financial centers may be used to evade taxes on interest income. A recent EU reform limits the scope for this type of tax evasion by introducing a withholding tax on interest income earned by EU households in Switzerland and several other offshore centers. This paper estimates the impact of the withholding tax on Swiss bank deposits held by EU residents while using non-EU residents who were not subject to the tax as a comparison group. We present evidence that Swiss bank deposits owned by EU residents declined by 30–40% relative to other Swiss bank deposits in two quarters immediately before and after the tax was introduced. We also present evidence suggesting that the drop in Swiss bank deposits was driven by behavioral responses aiming to escape the tax - such as the transfer of funds to bank accounts in other offshore centers and the transfer of formal ownership of Swiss bank accounts to offshore holding companies - rather than repatriation of funds.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 111 (2014)
Issue (Month): C ()
Pages: 46-62

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Handle: RePEc:eee:pubeco:v:111:y:2014:i:c:p:46-62

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Web page: http://www.elsevier.com/locate/inca/505578

Related research

Keywords: Tax evasion; Capital taxation; Savings directive; Tax havens;

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References

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  1. Tina Klautke & Alfons Weichenrieder, 2008. "Interest Income Tax Evasion, the EU Savings Directive, and Capital Market Effects," CESifo Working Paper Series 2300, CESifo Group Munich.
  2. Joao Santos Silva & Silvana Tenreyro, 2005. "The log of gravity," LSE Research Online Documents on Economics 3744, London School of Economics and Political Science, LSE Library.
  3. Raj Chetty, 2008. "Is the Taxable Income Elasticity Sufficient to Calculate Deadweight Loss? The Implications of Evasion and Avoidance," NBER Working Papers 13844, National Bureau of Economic Research, Inc.
  4. Niels Johannesen & Gabriel Zucman, 2012. "The End of Bank Secrecy? An Evaluation of the G20 Tax Haven Crackdown," PSE Working Papers halshs-00665054, HAL.
  5. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
  6. Thomas Hemmelgarn & Gaëtan J.A. Nicodème, 2009. "Tax-Co-ordination in Europe: Assessing the First Years of the EU-Savings Taxation Directive," CESifo Working Paper Series 2675, CESifo Group Munich.
  7. Huizinga, H.P. & Nicodeme, G., 2004. "Are international deposits tax-driven?," Open Access publications from Tilburg University urn:nbn:nl:ui:12-142606, Tilburg University.
  8. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
  9. Zsolt Darvas, 2012. "Real effective exchange rates for 178 countries: A new database," IEHAS Discussion Papers 1210, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  10. James R. Hines, 2010. "Treasure Islands," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 103-26, Fall.
  11. Niels Johannesen, 2009. "Tax Evasion and Swiss Bank Deposits," EPRU Working Paper Series 2010-05, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Sep 2010.
  12. Gabriel Zucman, 2013. "The Missing Wealth of Nations: Are Europe and the U.S. net Debtors or net Creditors?," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 1321-1364.
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Citations

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Cited by:
  1. Johannesen, Niels, 2014. "Tax evasion and Swiss bank deposits," Journal of Public Economics, Elsevier, vol. 111(C), pages 46-62.
  2. Katarzyna Bilicka and Clemens Fuest, 2012. "With which countries do tax havens share information?," EUI-RSCAS Working Papers 6, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  3. Katarzyna Bilicka & Clemens Fuest, 2014. "With which countries do tax havens share information?," International Tax and Public Finance, Springer, vol. 21(2), pages 175-197, April.
  4. Thomas Hemmelgarn & Gaëtan J.A. Nicodème, 2009. "Tax-Co-ordination in Europe: Assessing the First Years of the EU-Savings Taxation Directive," CESifo Working Paper Series 2675, CESifo Group Munich.
  5. James Alm, 2012. "Measuring, explaining, and controlling tax evasion: lessons from theory, experiments, and field studies," International Tax and Public Finance, Springer, vol. 19(1), pages 54-77, February.
  6. repec:hal:wpaper:halshs-00565224 is not listed on IDEAS
  7. Marcel GERARD & Lucia GRANELLI, 2013. "From the EU Savings Directive to the US FATCA, Taxing Cross Border Savings Income," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2013007, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  8. Niels Johannesen & Gabriel Zucman, 2014. "The End of Bank Secrecy? An Evaluation of the G20 Tax Haven Crackdown," American Economic Journal: Economic Policy, American Economic Association, vol. 6(1), pages 65-91, February.
  9. repec:hal:wpaper:halshs-00665054 is not listed on IDEAS
  10. Shafik Hebous, 2011. "Money at the Docks of Tax Havens: A Guide," CESifo Working Paper Series 3587, CESifo Group Munich.

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