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Welfare and Distribution Effects of Bank Secrecy Laws

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  • Frode Brevik
  • Manfred Gärtner

Abstract

We analyze an overlapping-generations world comprising two groups of small countries whose preferences for public spending differ. Key steady-state effects from introducing bank secrecy and a withholding tax in countries with low government spending are: a reduction of global capital and income, a shift of wealth towards bank-secrecy countries, and falling consumption, welfare and government spending despite rising tax rates in the rest of the world. Qualitative results are robust to changes in tax-payer honesty, the Leviathan effect (permitting governments to drive public spending higher than citizens prefer), and the fraction of withholding taxes repatriated to countries of residence.

Suggested Citation

  • Frode Brevik & Manfred Gärtner, 2005. "Welfare and Distribution Effects of Bank Secrecy Laws," University of St. Gallen Department of Economics working paper series 2005 2005-07, Department of Economics, University of St. Gallen.
    • Handle: RePEc:usg:dp2005:2005-07
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    Cited by:

    1. Frode Brevik & Manfred Gärtner, 2006. "Macroeconomic effects of banking secrecy when tax evasion is endogenous," University of St. Gallen Department of Economics working paper series 2006 2006-10, Department of Economics, University of St. Gallen.
    2. Charles B. Blankart & Hans Bernhard Beus & Manfred Gärtner & Norbert Walter Borjans, 2012. "Kann das Steuerabkommen zwischen Deutschland und der Schweiz zu größerer Steuergerechtigkeit führen?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 65(18), pages 03-16, October.

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    More about this item

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • 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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