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Welfare Implications of AEoI

Author

Listed:
  • Marcelo Arbex

    () (Department of Economics, University of Windsor)

  • Sidney Caetano

    () (Faculdade de Economia, Universidade Federal de Juiz de Fora)

Abstract

The Automatic Exchange of Information (AEoI) is a tax standard that governs how tax authorities of participating countries exchange information related to taxpayers’ foreign investments. We quantify the mismatch between costs and benefits of information exchange agreements and investigate the impact of foreign investment taxation and costs associated with information reporting requirements on the welfare of compliant countries. This paper shows that AEoI-abiding economies would entail substantial welfare losses. For any combination of interest rate, foreign earnings taxation and compliance cost, the welfare costs of AEoI are larger for the source (small open) economy than the revenue is for the residence country. Without commitment and enforcement, countries might be tempted to deviate from such agreements and share information only partially. The paper’s result provides a rationale for sharing of AEoI infrastructure costs among jurisdictions.

Suggested Citation

  • Marcelo Arbex & Sidney Caetano, 2016. "Welfare Implications of AEoI," Working Papers 1608, University of Windsor, Department of Economics.
  • Handle: RePEc:wis:wpaper:1608
    as

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    File URL: http://web2.uwindsor.ca/economics/RePEc/wis/pdf/1608.pdf
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    References listed on IDEAS

    as
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    7. Huizinga, Harry & Nielsen, Soren Bo, 2003. "Withholding taxes or information exchange: the taxation of international interest flows," Journal of Public Economics, Elsevier, vol. 87(1), pages 39-72, January.
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    13. Wolfgang Eggert & Martin Kolmar, 2002. "Residence-Based Capital Taxation in a Small Open Economy: Why Information is Voluntarily Exchanged and Why it is Not," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(4), pages 465-482, August.
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    More about this item

    Keywords

    cross-border tax evasion; information exchange; international standards of transparency.;

    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
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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