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The redistributive impact of hypocrisy in international taxation
Author(s) -
Hakelberg Lukas,
Schaub Max
Publication year - 2018
Publication title -
regulation and governance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.417
H-Index - 45
eISSN - 1748-5991
pISSN - 1748-5983
DOI - 10.1111/rego.12156
Subject(s) - hypocrisy , tax haven , economics , attractiveness , perspective (graphical) , international economics , value (mathematics) , public economics , double taxation , monetary economics , international trade , business , direct tax , political science , law , psychology , artificial intelligence , computer science , psychoanalysis , machine learning
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.