DP12222 Banks Defy Gravity in Tax Havens

Author(s): Vincent Bouvatier, Gunther Capelle-blancard, Anne-Laure Delatte
Publication Date: August 2017
Date Revised: February 2021
Keyword(s): Country-by-country reporting, International Banking, tax evasion, tax havens
JEL(s): F23, G21, H22, H32
Programme Areas: Public Economics, Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=12222

Using country-by-country reports from the Systemically Important Banks in the European Union, we measure "abnormal'' banking activity in tax havens (TH). Our assessment is based on a gravity model used to predict the expected international turnover of EU banks worldwide. We find that: 1) banks turnover in TH represents on average twice the gravity predictions; 2) the abnormal turnover of EU banks represents 1.46\% of GDP in TH and varies between 16\% of GDP and zero; 3) there is a large heterogeneity across TH with Hong Kong, Luxembourg and Singapore concentrating the bulk of the abnormal turnover; 4) we observe a decline and a concentration of abnormal turnover since the reporting requirement has been introduced in the EU.