Macroeconomic effects of bank secrecy when tax evasion is endogenous
Series
Discussion paper
Type
discussion paper
Date Issued
2006-05-01
Author(s)
Abstract
We analyze a multi-country model in which a small group of countries adopts banking secrecy (BS) laws and a withholding tax. The other group doesn't. BS countries benefit in all relevant macroeconomic variables, including taxes and the provision of public goods. In non- BS countries most of the same variables deteriorate - when tax evasion is exogenous or its tax elasticity is moderate. When this elasticity is high, BS may drive these countries' tax rates down also, and income, consumption and wealth may rise. However, public-goods provision always deteriorates and welfare falls. We also argue that this case does not appear to be relevant empirically.
[http://www.vwa.unisg.ch/RePEc/usg/dp2006/DP10_ga.pdf Download full text]
[http://www.vwa.unisg.ch/RePEc/usg/dp2006/DP10_ga.pdf Download full text]
Language
English
Keywords
Banking secrecy
tax evasion
withholding tax
welfare effects
HSG Classification
contribution to scientific community
Refereed
No
Publisher
Department of Economics
Publisher place
University of St. Gallen
Number
10-2006
Start page
26
Subject(s)
Division(s)
Eprints ID
29411