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Avoiding Taxes: Escaping the Exchange of Information: Tax Evasion via Citizenship-by-Investment

Author

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  • Dominika Langenmayr
  • Lennard Zyska

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 are citizenship-by-investment programs, which offer 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

  • Dominika Langenmayr & Lennard Zyska, 2021. "Avoiding Taxes: Escaping the Exchange of Information: Tax Evasion via Citizenship-by-Investment," Working Papers 204, Bavarian Graduate Program in Economics (BGPE).
    • Handle: RePEc:bav:wpaper:204_langenmayrzyska
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    References listed on IDEAS

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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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