MAXIMIZING THE TAX REVENUES FROM THE AUTOMATIC FINANCIAL ACCOUNT INFORMATION EXCHANGE SYSTEM

Project Information

TAXFAIR

Grant agreement ID: 101059174

DOI

10.3030/101059174

Project closed

EC signature date 28 June 2022

Start date 1 June 2023

End date 30 November 2025

Funded under

• Marie Skłodowska-Curie Actions (MSCA)

Total cost

No data

EU contribution

€ 226 751,04

Coordinated by

NORGES HANDELSHOYSKOLE
Norway

Periodic Reporting for period 1 - TAXFAIR (MAXIMIZING THE TAX REVENUES FROM THE AUTOMATIC FINANCIAL ACCOUNT INFORMATION EXCHANGE SYSTEM)

Reporting period: 2023-06-01 to 2025-11-30

Summary of the context and overall objectives of the project

Tax avoidance and evasion is a global problem which deprives governments and society as a whole of substantial revenue essential for funding public spending. Tax transparency is a key policy tool to tackle tax evasion and avoidance. As a result, several tax transparency initiatives have been launched, including a global system for the automatic exchange of information (AEOI). Yet, the effectiveness of such system is not well understood. Funded by the Marie Skłodowska-Curie Actions programme, the TAXFAIR project will determine the traits that such a system should have in order to maximise tax revenue extraction. To that end, it will combine information from two data sets: one comprising administrative data on Norwegian residents, and one containing institutional information on locally implemented AEOI systems. Overall, TAXFAIR will provide a knowledge-based framework for governments around the world to implement an effective system for the automatic exchange of information exchange.

Work performed from the beginning of the project to the end of the period covered by the report and main results achieved so far

First, as envisioned in the MSCA application, I worked on designing the CRS law dataset. For that I relied on the the OECD peer review reports which provide detailed information on how countries enforce the Common Reporting Standard (CRS). The 2020 report assessed whether domestic legal frameworks were aligned with OECD standards, focusing on the inclusion of financial assets and institutions. A second report in 2022 evaluated the effectiveness of CRS implementation in practice, examining factors such as communication with financial institutions, verification of reporting quality, penalties for non-compliance, and staffing. I created a dictionary to classify countries into low versus high enforcement along several dimensions. I describe this in the working paper section 3.1.2 Data on CRS Activation and CRS Enforcement and appendix A.1 The OECD Global Forum and the Common Reporting Standard, see https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4630849. Once, the paper using this dataset is published (see the paper described below, we are currently on a revise and resubmit to a top filed journal), I will make the data publicly available on my website so that other researchers can use it for further projects.

Second, as envisioned in the MSCA application, I worked together with my co-authors on performing a granular comparison of the different AEOI systems locally implemented. The results of the analysis are provided in the working paper "Lost in information: national implementation of global tax agreements, co-authored with A. Alstadsæter, J. Miethe, & B. Stage. This paper studies how national implementation shapes individual responses to global agreements by looking at the introduction of the multilateral standard for automatic information exchange on financial assets, i.e. the Common Reporting Standard (CRS). We utilize rich micro-level data on all bank transfers to Norway. This provides us with unparalleled detail on hidden ownership structures. These data show a significant increase in cash repatriation from tax havens post-CRS implementation. Yet, we document substantial heterogeneity in responses down to a null result if CRS enforcement is weak. Relying on macroeconomic data on crossborder bank deposits, we employ model averaging techniques to establish the most important characteristics of the receiving countries that make the CRS more effective. Our results suggest that a highly digitized tax administration triggers twice the drop in tax haven deposits compared to a tax administration relying on paper tax returns. These results have implications for global policy initiatives more broadly. The working paper is available here https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4630849. It is currently under revise and resubmission at the Journal of Public Economics which is a top field journal for public economics (ABS level 3, 8.8 CiteScore. 3.4 Impact Factor): together with my co-authors, we are working on the revision and plan to submit it back to the Journal by the end of the year. If successful, the paper might be accepted to publication in 2026.

Progress beyond the state of the art and expected potential impact (including the socio-economic impact and the wider societal implications of the project so far)

While prior research has documented a general decline in tax haven deposits following CRS implementation, this study is the first to systematically examine how enforcement heterogeneity across countries drives these outcomes. We make three key contributions. First, we provide microeconomic evidence on how CRS-exposed bank accounts respond to the policy. Our data allows us to focus on bank accounts with more than one layer of secrecy, isolating the types of financial structures most commonly used for tax evasion. Second, we demonstrate that weak enforcement in tax havens severely undermines CRS effectiveness. This explains the mixed results in previous macro-level studies, which did not account for variation in enforcement strength. And third, we highlight the central role of tax administration capacity in translating global agreements into meaningful reductions in tax evasion. Digitalization emerges as a key determinant of success, offering practical guidance for policymakers seeking to strengthen tax enforcement.

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