Cover of EconPol Working Paper 52

Offshore Tax Evasion and Wealth Inequality: Evidence from a Tax Amnesty in the Netherlands

Wouter Leenders (University of California), Arjan Lejour, Simon Rabaté, Maarten van’t Riet (EconPol Europe; CPB Netherlands Bureau for Economic Policy Analysis)

While tax administrations have made considerable progress in fighting tax evasion, it remains a seemingly inextricable part of our world. Exploiting unique datasets covering over 28,000 tax evaders in the Netherlands, Wouter Leenders, Arjan Lejour, Simon Rabaté and Maarten van’t Riet investigate the distribution of tax evasion and its implications for the measurement of wealth inequality. They show that the distributional pattern of tax evasion depends on the type of tax evasion, e.g. it depends on the offshore country of choice. They explore a number of explanations to account for the differences in results and caution against projecting distributional patterns of detected tax evasion onto still undetected evasion. 
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Abstract

Exploiting unique datasets covering over 28,000 tax evaders in the Netherlands, we investigate the distribution of tax evasion and its implications for the measurement of wealth inequality. In contrast to Alstadsæter, Johannesen and Zucman (2019), the correction for offshore wealth has only a modest effect on top wealth shares. We show that the distributional pattern of tax evasion depends on the type of tax evasion, e.g. it depends on the offshore country of choice. We explore a number of explanations to account for the differences in results and caution against projecting distributional patterns of detected tax evasion onto still undetected evasion. We also study the dynamic compliance behaviour of tax amnesty participants and document large and sustained increases in reported wealth of around 60% following amnesty participation.Combined with evidence of only a modest increase in the adoption of tax avoidance strategies, this suggests that amnesty participation can lead to substantial public revenue gains.

Citation

Wouter Leenders, Arjan Lejour, Simon Rabaté, Maarten van’t Riet: "Offshore Tax Evasion and Wealth Inequality: Evidence from a Tax Amnesty in the Netherlands", EconPol Working Paper 52, December 2020