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Escaping the exchange of information: Tax evasion via citizenship-by-investment

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  • Langenmayr, Dominika
  • Zyska, Lennard

Abstract

With automatic exchange of tax information among countries now common, tax evaders have had to find new ways to hide their offshore holdings. One such way is citizenship-by-investment, which offers foreigners a new passport for a local investment or a fixed fee. We show analytically that high-income individuals acquire a new citizenship to lower the probability that their tax evasion is detected through information exchange. Using data on cross-border bank deposits, we find that deposits in tax havens increase after a country starts offering a citizenship-by-investment program, providing indirect evidence that tax evaders use these programs.

Suggested Citation

  • Langenmayr, Dominika & Zyska, Lennard, 2023. "Escaping the exchange of information: Tax evasion via citizenship-by-investment," Journal of Public Economics, Elsevier, vol. 221(C).
    • Handle: RePEc:eee:pubeco:v:221:y:2023:i:c:s0047272723000476
    DOI: 10.1016/j.jpubeco.2023.104865
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    Cited by:

    1. Jeanne Bomare & Ségal Le Guern Herry, 2022. "Will We Ever Be Able to Track Offshore Wealth? Evidence from the Offshore Real Estate Market in the UK," SciencePo Working papers Main hal-03811306, HAL.
    2. Elisa Casi & Mohammed Mardan & Rohit Reddy Muddasani, 2022. "So close and yet so far: the ability of mandatory disclosure rules to crack down on offshore tax evasion," WIDER Working Paper Series wp-2022-116, World Institute for Development Economic Research (UNU-WIDER).
    3. Ludger Schuknecht & Vincent Siegerink, 2021. "The Political Economy of the International Tax Transparency Agenda in the G20/OECD Context," CESifo Working Paper Series 8813, CESifo.
    4. Casi, Elisa & Mardan, Mohammed & Stage, Barbara M. B., 2023. "Citizenship/Residence by Investment and Digital Nomad Visas: The Golden Era of Individual Tax Evasion and Avoidance?," Discussion Papers 2023/12, Norwegian School of Economics, Department of Business and Management Science.
    5. Alstadsæter, Annette & Casi, Elisa & Miethe, Jakob & Stage, Barbara M. B., 2023. "Lost in Information: National Implementation of Global Tax Agreements," Discussion Papers 2023/22, Norwegian School of Economics, Department of Business and Management Science, revised 20 Feb 2024.
    6. Jeanne Bomare & Ségal Le Guern Herry, 2022. "Will We Ever Be Able to Track Offshore Wealth? Evidence from the Offshore Real Estate Market in the UK," Working Papers hal-03811306, HAL.
    7. Jeanne Bomare & Ségal Le Guern Herry, 2022. "Will We Ever Be Able to Track Offshore Wealth? Evidence from the Offshore Real Estate Market in the UK," SciencePo Working papers hal-03811306, HAL.

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    More about this item

    Keywords

    Citizenship-by-investment programs; Tax havens; Tax evasion;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • K37 - Law and Economics - - Other Substantive Areas of Law - - - Immigration Law

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