• Fiscal evasion in the old world


    I just finished reading the book “Ces 600 milliards qui manquent à la France“, in which Antoine Peillon exposes some elements of the massive tax evasion that takes place in France, in particular thanks to the diligence of UBS. This is an interesting book, which holds a lot of information and suggests plausible mechanisms behind the systematic evasion business, although the text is at times quite dense and one is left with the feeling that some connections remain to be established or documented.

    To put the global estimations in perspective, the book mentions the work of Gabriel Zucman, PhD student at PSE and currently on the job market, whose job market paper (The Missing Wealth of Nations: Are Europe and the U.S. net Debtors or net Creditors?) attempts to quantify the amoount of unrecorded financial wealth held in tax heavens around the world. His conclusion is that accounting for the evasion by Eurozone nationals would turn the EU into a net creditor!

    This paper shows that official statistics substantially underestimate the net foreign asset positions of rich countries because they fail to capture most of the assets held by households in offshore tax havens. Drawing on a unique Swiss dataset and exploiting systematic anomalies in countries’ portfolio investment positions, I find that around 8% of the global financial wealth of households is held in tax havens, three-quarters of which goes unrecorded. On the basis of plausible assumptions, accounting for unrecorded assets turns the eurozone, officially the world’s second largest net debtor, into a net creditor. It also reduces the U.S. net debt significantly. The results shed new light on global imbalances and challenge the widespread view that, after a decade of poor-to-rich capital flows, external assets are now in poor countries and debts in rich countries. I provide concrete proposals to improve international statistics.

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