Secrecy jurisdictions and cross-border financial flows

• Název práce v češtině: Finanční tajemství a přeshraniční finanční toky
• Název v anglickém jazyce: Secrecy jurisdictions and cross-border financial flows
• Akademický rok vypsání: 2020/2021
• Typ práce: bakalářská práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: PhDr. Miroslav Palanský, Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 27.09.2021
• Datum zadání: 27.09.2021

Předběžná náplň práce v anglickém jazyce

Research question and motivation

The main research question I intend to study in my thesis is to explore which characteristics of secrecy jurisdictions influence their level of foreign inward bank deposits. This will help us to understand why taxpayers tend to choose certain territories to store their assets instead of other countries or even instead of keeping them in their countries of origin.

The question of secrecy jurisdictions, their characteristics and impact on economy is right in the crossroad of many challenges of contemporary economic research as well as the social and political one. It touches the areas of wealth inequality, globalization, tax and financial systems, the rule of law and rapid digitalization. It is estimated that 10% of the world’s GDP is held in tax havens and secrecy jurisdictions (Alstadsæter, Johanessen and Zucman, 2018).

With the reveal of the Panama Papers and Luxemburg Leaks we were able to have a look behind the curtain of the tax evasion mechanisms and could see many important persons of today’s world being identified as holders of so-called offshore accounts. It showed us that many of the creators of law were the ones who held their accounts in these countries, therefore it is important to properly estimate risk factors of the jurisdictions which are enabling hiding of assets.

The implementation of the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) has led to lower volumes of household assets in tax havens compared to the situation without these agreements by 67% (Ahrens and Bothner 2020). However, there are many other aspects which can influence movement of these assets. In my thesis I would like to explore and observe some of them. With these results we would be able identify other important characteristics of high-secrecy jurisdictions and therefore help law makers to better focus their efforts.

Contribution
Studying the characteristics of the jurisdictions of interest and their impact on the inward deposits can help us identify important attributes influencing the attractiveness of each territory for the purpose of cross-border asset storage.

In current literature the attention is mostly on the importance of the automatic exchange of information following the FATCA agreement in 2014 and the CRS after 2017. Therefore, most of the research is testing the question of the influence of an increase in transparency (via newly established relationships of automatic information exchange).

In contrast to this literature, in this thesis I will evaluate the effects of increases in financial secrecy between 1990-2015. I will use the novel Regulation of Illicit Financial Flows (RIFF) database in combination with other data on characteristics of individual secrecy jurisdictions. Using mathematical and machine learning tools, I will model the movement of cross-border financial assets between countries and territories and therefore be able to identify jurisdictions of interest.

Methodology

I will use multiple databases as well as datasets created by scraping the data from the internet. I will use the RIFF database tracking secrecy around the world, as well as data from Bank for International Settlements on cross-border deposits.
This will enable to further the previous research and to observe the impact of various variables on the inward deposits in selected territories.

I will test the impact of these variables on the quantity and movement of the assets.

Outline

Abstract
Introduction
a. Motivation for the research
b. Overview of the relevant research
c. My contribution to the existing knowledge
d. Main results
e. Organization of the theses
Related Literature
a. secrecy jurisdictions
b. tax evasion
c. mathematical models
Methodology
a. Description of Datasets
b. Hypothesis setting
c. Used models
d. Explanation of models
e. Hypothesis testing
Results
a. Observations from models
b. Hypothesis testing results
c. Interpretation of the results
Conclusion
a. Implications of the results for practice and theory
b. Possible further research
List of References
Appendix
a. Used code to evaluate models

List of academic literature:
Bibliography
Ahrens, L., & Bothner, F. (2020). The Big Bang: Tax Evasion After Automatic Exchange of Information Under FATCA and CRS. New Political Economy, 25(6), 849–864. https://doi.org/10.1080/13563467.2019.1639651
Allingham, M. G., & Sandmo, A. (1972). Income tax evasion: a theoretical analysis. Journal of Public Economics, 1(3), 323–338. https://doi.org/https://doi.org/10.1016/0047-2727(72)90010-2
Alm, J. (2019). WHAT MOTIVATES TAX COMPLIANCE? Journal of Economic Surveys, 33(2), 353–388. https://doi.org/https://doi.org/10.1111/joes.12272
Alstadsæter, A., Johannesen, N., & Zucman, G. (2018). Who owns the wealth in tax havens? Macro evidence and implications for global inequality. Journal of Public Economics, 162, 89–100. https://doi.org/https://doi.org/10.1016/j.jpubeco.2018.01.008
Dharmapala, D., & Hines, J. R. (2009). Which countries become tax havens? Journal of Public Economics, 93(9), 1058–1068. https://doi.org/https://doi.org/10.1016/j.jpubeco.2009.07.005