'Panama Papers' and Colombian government demonstrate how to decrease tax evasion by the wealthy
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The Panama Papers are back in the news, as the U.S. brought its first indictments against four men connected to Mossack Fonseca, an offshore account used to launder money and avoid taxes. This week, while researching the papers, I came across an interest'Panama Papers' and Colombian government demonstrate how to decrease tax evasion by the wealthy
The Panama Papers are back in the news, as the U.S. brought its first indictments against four men connected to Mossack Fonseca, an offshore account used to launder money and avoid taxes. This week, while researching the papers, I came across an interesting piece of research by Juliana Londoño-Vélez at UC Berkeley that used some special circumstances in Colombia to examine how the leaked papers impacted reporting of assets. Her paper is titled: “Can Wealth Taxation Work in Developing Countries? Quasi-experimental Evidence from Colombia.” This is interesting because there is much debate about the behavioral responses to wealth taxes and enforcement, and Columbia provides a unique opportunity because they imposed a series of wealth taxes and they required yearly reporting on wealth. Here’s a brief summary of Londoño-Vélez’s study. The unique situation in Columbia It’s difficult to study behavioral responses to wealth taxation. The problem is threefold because: Few countries collect data on wealth It’s rare to find an event that occurs that’s large enough to impact behavior It’s difficult to measure responses to taxation, especially because secrecy is what makes tax shelters popular The situation in Colombia and the release of the Panama Papers provides an opportunity to overcome these challenges. Read more