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Unlocking the gates of paradise: General equilibrium effects of information exchange

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  • Marchiori, Luca
  • Pierrard, Olivier

Abstract

In a move to reduce bank secrecy and fight international tax evasion, about 100 tax jurisdictions have so far committed to implement a new standard on the Automatic Exchange of Information (AEoI). This paper examines the quantitative consequences of the AEoI for an onshore country, using a neoclassical model with an offshore financial center. Our main findings are (i) the AEoI increases government revenues but reduces welfare; (ii) welfare improves when using the AEoI revenues to reduce tax pressure or when including household wealth inequality; (iii) government revenues increase further when accounting for a disclosure penalty cost. These results depend on the general equilibrium effects, absent from earlier papers on offshore financial centers.

Suggested Citation

  • Marchiori, Luca & Pierrard, Olivier, 2018. "Unlocking the gates of paradise: General equilibrium effects of information exchange," Journal of Economic Dynamics and Control, Elsevier, vol. 87(C), pages 152-172.
    • Handle: RePEc:eee:dyncon:v:87:y:2018:i:c:p:152-172
    DOI: 10.1016/j.jedc.2017.12.006
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    More about this item

    Keywords

    Offshore center; Information exchange; International capital flows; Neoclassical model;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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