How to tax capital in a globalized world? Lessons from population-wide administrative data

How to tax capital in a globalized world? Lessons from population-wide administrative data

There is growing concern about the practicality of taxing capital in a globalized world. Half of the world's foreign direct investments are routed through offshore tax havens.

prosjekt

About/Aims
Background

In April 2016, The Panama Papers showed that rich individuals routinely use shell companies in tax havens to avoid or evade taxes. 

More about the project

We combine Scandinavian administrative micro data with information from Swiss Leaks, Panama Papers, voluntary disclosure of hidden offshore wealth, and random audits to provide new insights in the anatomy of capital tax evasion and how tax evasion varies across the wealth distribution.

We estimate that the equivalent of 10 % of world GDP is held in tax havens globally, but this average masks a great deal of heterogeneity – from a few percent of GDP in Scandinavia, to about 15 % in Continental Europe, and 60 % in Gulf countries and some Latin American economies. We use these estimates to construct revised series of top wealth shares in ten countries, which account for close to half of world GDP. Because offshore wealth is very concentrated at the top, accounting for it increases the top 0.01 % wealth share substantially. Web page for data and appendix.

In a companion paper, that aims at estimating the size and distribution of tax evasion in rich countries, we find that tax evasion rises sharply with wealth. On average about 3 % of personal taxes are evaded in Scandinavia, but this figure rises to close to 30 % in the top 0.01 % of the wealth distribution, a group that includes households with more than $45 million in net wealth. Our findings also suggest that after reducing tax evasion – by using tax amnesties – tax evaders do not legally avoid taxes more. Web page for data and appendix.

Another part of the project focuses on multinational corporations’ use of tax havens. The results show that close to 40 % of multinational profits are shifted to tax havens globally. Web page with data visualised and more.

We also show that the fiscal authorities seem to concentrate their efforts on relocating profits booked by multinationals in other high-tax countries, crowding out the enforcement on transactions that shift profits to tax havens.

  • Tax haven Skatteparadis

    Tax haven Skatteparadis

    Photo
    Bruce Rolff, Shutterstock
Project ended:
Project manager
Annette Alstadsæter
Annette Alstadsæter
Professor
annette.alstadsater@nmbu.no
Department
  • School of Economics and Business
Time frame
1. January 2017 to 31. December 2020
Affiliation
SKATTEFORSK Senter for skatte- og adferdsforskning