Escaping the Exchange of Information: Tax Evasion via Citizenship-by-Investment
CESifo, Munich, 2021
CESifo Working Paper No. 8956
![](https://cesifo.org/DocImg/cesifo1_wp8956.jpg?c=1689236973)
With (automatic) exchange of tax information among countries now common, tax evaders have had to find new ways to hide their offshore holdings. One such way are citizenship-by-investment programs, which offer foreigners a new passport for a local investment or a fixed fee. We show analytically that high-income individuals acquire a new citizenship to lower the probability that their tax evasion is detected through information exchange. Using data on cross-border bank deposits, we find that deposits in tax havens increase after a country starts offering a citizenship-by-investment program, providing indirect evidence that tax evaders use these programs.
Public Finance