TY - JOUR

T1 - The redistributive impact of hypocrisy in international taxation

AU - Hakelberg, Lukas

AU - Schaub, Max

N1 - Publisher Copyright: © 2017 John Wiley & Sons Australia, Ltd

PY - 2018/9/1

Y1 - 2018/9/1

N2 - Why do tax havens, whose attractiveness for foreign investors depends upon financial secrecy, agree to automatically report account data to foreign governments? From a contractualist perspective, their cooperation should be motivated by the expectation of joint gains. Prior to such agreement, however, tax havens expected outflows of foreign capital and reductions in economic activity as likely outcomes. We show that the United States (US) imposed automatic information exchange on these countries without itself participating. The result is a strongly redistributive regime that worsens the economic situation of tax havens. By means of a difference-in-differences analysis, we ascertain a substantial and statistically significant negative effect of a US sanction threat on the value of assets held by foreigners in tax havens relative to non-havens. The effect becomes stronger when the US is included in the non-haven group. The analysis confirms the US's ability to redistribute financial wealth internationally through organized hypocrisy.

AB - Why do tax havens, whose attractiveness for foreign investors depends upon financial secrecy, agree to automatically report account data to foreign governments? From a contractualist perspective, their cooperation should be motivated by the expectation of joint gains. Prior to such agreement, however, tax havens expected outflows of foreign capital and reductions in economic activity as likely outcomes. We show that the United States (US) imposed automatic information exchange on these countries without itself participating. The result is a strongly redistributive regime that worsens the economic situation of tax havens. By means of a difference-in-differences analysis, we ascertain a substantial and statistically significant negative effect of a US sanction threat on the value of assets held by foreigners in tax havens relative to non-havens. The effect becomes stronger when the US is included in the non-haven group. The analysis confirms the US's ability to redistribute financial wealth internationally through organized hypocrisy.

KW - capital flows

KW - coercion

KW - FATCA, sanctions, tax havens

KW - Politics

UR - http://www.scopus.com/inward/record.url?scp=85052757813&partnerID=8YFLogxK

U2 - 10.1111/rego.12156

DO - 10.1111/rego.12156

M3 - Journal articles

AN - SCOPUS:85052757813

VL - 12

SP - 353

EP - 370

JO - Regulation and Governance

JF - Regulation and Governance

SN - 1748-5983

IS - 3

ER -