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Norwegian AI Directory

How to tax capital in a globalized world? Lessons from population-wide administrative data


Description:

There is growing concern about the practicality of taxing capital in a globalized world. Half of the world's foreign direct investments are routed through offshore tax havens. In April 2016, The Panama Papers showed that rich individuals routinely use shell companies in tax havens to avoid or evade taxes. Still, little is known about who evades capital taxes, why, and to which extent. Current estimates on offshore tax evasion are based on aggregate data. We are the first to utilize unique new administrative micro data from Norway and Sweden to provide much sought after insights in the anatomy of capital tax evasion to governments, media, NGOs, and researchers. We have access to population wide samples of individuals who have been found evading taxes, data on firms' and individuals' cross-border bank transfers, detailed taxpayer information, exhaustive coverage of the richest individuals at the micro-level, as well as a link between firms and individuals. First, we provide the first comprehensive assessment of how tax evasion varies across the wealth distribution. By combining our results with aggregate data, we can construct revised estimates of income and wealth inequality all over the world, when taking into account income and wealth that is unreported to tax authorities. Second, we develop and implement innovative machine learning methods to detect international tax evasion. If successful, this project could revolutionize the way capital taxes are enforced all over the world. Third, we provide credible causal estimates of how capital taxation affects international tax evasion. The results are likely to illuminate the public debate on the desirability of wealth taxes, which has gained prominence worldwide following the publication of Thomas Piketty's (2014) book, Capital in the 21st Century. Most importantly, we provide the very first estimate of the tax elasticity of capital flight, which is the key determinant of the optimal tax rate on Capital


Project leader: Annette Alstadsæter

Started: 2017

Ends: 2021

Category: Universiteter

Sector: UoH-sektor

Budget: 5616000

Institution: HANDELSHØYSKOLEN

Address: Ås