We analyze a multi-country model in which a small group of countries adopts banking secrecy (BS) laws and a withholding tax. The other group doesn't. BS countries benefit in all relevant macroeconomic variables, including taxes and the provision of public goods. In non- BS countries most of the same variables deteriorate - when tax evasion is exogenous or its tax elasticity is moderate. When this elasticity is high, BS may drive these countries' tax rates down also, and income, consumption and wealth may rise. However, public-goods provision always deteriorates and welfare falls. We also argue that this case does not appear to be relevant empirically.
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Find related papers by JEL classification: E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission H2 - Public Economics - - Taxation, Subsidies, and Revenue
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