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From tax evasion to tax planning

Author

Listed:
  • Arnaud Bourgain

    (CREA, University of Luxembourg)

  • Patrice Pieretti

    (CREA, University of Luxembourg)

  • Skerdilajda Zanaj

    (CREA, University of Luxembourg)

Abstract

The aim of this paper is to analyze within a simple model how a re- moval of bank secrecy can impact tax revenues and banks' profitability assuming that offshore centers are able to offer sophisticated but legal or not easily detectable tax planning. Two alternative regimes are considered. A first in which there is strict bank secrecy and a second where there is international information exchange for tax purposes. We show in particular that sharing tax information with onshore coun- tries can be a dominant strategy for an OFC if there is enough scope for providing tax planning. Moreover, a partial reduction of tax lia- bilities can already prompt OFCs to voluntarily exchange relevant tax information. We also highlight a surprising result. The possible re- moval of bank secrecy may, under some conditions, reduce the onshore country's tax revenue.

Suggested Citation

  • Arnaud Bourgain & Patrice Pieretti & Skerdilajda Zanaj, 2012. "From tax evasion to tax planning," DEM Discussion Paper Series 12-16, Department of Economics at the University of Luxembourg.
    • Handle: RePEc:luc:wpaper:12-16
    as

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    File URL: http://wwwfr.uni.lu/content/download/58296/687922/file/2012-16%20-%20From%20tax%20evasion%20to%20tax%20planning.pdf
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    References listed on IDEAS

    as
    1. Desai, Mihir A. & Foley, C. Fritz & Hines, James Jr., 2006. "The demand for tax haven operations," Journal of Public Economics, Elsevier, vol. 90(3), pages 513-531, February.
    2. Elsayyad, May & Konrad, Kai A., 2012. "Fighting multiple tax havens," Journal of International Economics, Elsevier, vol. 86(2), pages 295-305.
    3. English, Mary & Shahin, Wassim, 1994. "Investigating the interest rate impact of changing secret bank deposit laws: Switzerland," Journal of Banking & Finance, Elsevier, vol. 18(3), pages 461-475, May.
    4. Philippe Bacchetta & María Espinosa, 2000. "Exchange-of-Information Clauses in International Tax Treaties," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(3), pages 275-293, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    offshore centers; tax planning; tax evasion;
    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
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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