VoxEU Column Financial Regulation and Banking Taxation

Exchange of information and bank deposits in international financial centres: An example of multilateral cooperation at work

Since the G20 declared in 2009 that “the era of bank secrecy is over”, jurisdictions have implemented an unprecedented range of measures designed to increase tax transparency by ensuring that information on foreign financial assets would be disclosed to tax authorities. This column presents the main results from a recent study on the impact of exchange of information on foreign-owned bank deposits in international financial centres. The findings highlight the effectiveness of the expansion of automatic exchange of information and provide evidence of the success of a comprehensive multilateral approach towards tax transparency.

In 2009, in response to widespread international concern about tax evasion, the G20 declared that “the era of bank secrecy is over”. Since then there has been a dramatic expansion in global tax transparency, largely driven by the Global Forum on Transparency and Exchange of Information. This body has established new multilateral initiatives to tackle tax evasion, including two key standards on information exchange: exchange of information on request (EOIR) and the more recent automatic exchange of information (AEOI). These standards mean that information on foreign financial assets is now being shared between tax authorities globally, making it harder for taxpayers to evade taxation by concealing assets overseas. 

Over 150 jurisdictions have committed to implementing the EOIR standard. This has occurred through bilateral agreements such as double tax conventions (DTCs) and Tax Information Exchange Agreements (TIEAs), as well as through multilateral agreements including the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC). Countries signing the MAC enter into information exchange agreements with every other MAC signatory jurisdiction, creating a multilateral network of exchanging jurisdictions (see Figure 1). Today, 130 jurisdictions have signed the MAC – implementing the EOIR standard in the equivalent of nearly 8,000 bilateral agreements. In addition, almost 100 countries have also committed to AEOI on account balances and other financial assets under a Common Reporting Standard by 2018. Taken together, these initiatives represent an unprecedented and comprehensive multilateral effort to fight global tax evasion as previously demanded by, for instance, Elsayyad and Konrad (2012). 

Figure 1 Global expansion of the exchange of information network

Note: Data on bilateral EOIR agreements post-2017 are preliminary and subject to revision. “EOIR agreement signed” refers to the signature of any agreement that establishes an EOIR relationship, including TIEAs, DTCs, and the MAC itself. To avoid double-counting, agreements that establish an EOIR relationship where one was already in place are not included (e.g. instances where two countries sign a DTC that provides for EOIR where a TIEA already provided for EOIR between the two countries).
Source: Data on information exchange agreements provided by the Global Forum.

This expansion in global tax transparency, together with unilateral measures such as voluntary disclosure programmes, have provoked a considerable response from taxpayers. To date, over 1 million individuals have disclosed their offshore assets and a total of over €102 billion in additional tax revenue has been identified (OECD 2019). This provides important evidence of a reaction from individuals to declare their assets and financial arrangements to a new level of transparency and ensure that previously undislosed assets and income would be subject to tax. 

Impact assessment of exchange of information

In a recent paper (O’Reilly et al. 2019), we examine the impact of exchange of information on foreign-owned bank deposits in international financial centres based on the most comprehensive dataset on bank deposits to date, provided by the Bank for International Settlements’ Locational Banking Statistics (LBS).1 This approach builds on the existing literature in this area, most notably the work of Johannesen and Zucman (2014). The literature examines changes in bank deposits in jurisdictions historically known as locations where taxpayers could use bank secrecy and lack of tax transparency as a means of concealing wealth from tax authorities. 

Bank deposits: Peaks, surges, and declines

The data show that after a strong increase prior to the Global Crisis, foreign-owned bank deposits in both international financial centre (IFC) and non-IFC jurisdictions peaked in 2008 before declining during the crisis (see Figure 2). Whereas non-IFC deposits recovered relatively quickly after the crisis and in 2018 even surpassed the previous peak, deposits in IFCs continued to decline. Between 2008 and 2019, the level of bank deposits in IFCs fell by about $410 billion, or about 24%.  

Figure 2 Evolution of foreign-owned bank deposits over time

Note: Data are provided for non-bank counterparties only. Data are aggregated across currencies, sectors, reporting institutions, and instrument type.
Source: Authors’ calculations based on BIS LBS.

Reasons for this decline in global IFC deposits may also arise from non-tax factors such as, for instance, falling global interest rates, which make holding assets in bank accounts unprofitable. More important for our analysis, however, is the hypothesis that individuals have reacted to a potential disclosure risk of their hidden wealth when information exchange agreements between tax authorities have been put in place. To assess taxpayers’ behavioural responses, we use a regression analysis to assess the impact of bank deposits held in IFCs by non-IFC residents to changes in tax transparency. We examine the impact of (1) signing an EOIR agreement including the MAC (in contrast to the earlier literature which did not account for MAC-based agreements); (2) publicly announcing the commitment to exchanging automatically; and (3) making automatic exchange of information fully operational. 

Our results suggest that commencement of AEOI is associated with a significant 22% decline of IFC bank deposits owned by individuals residing in non-IFC jurisdictions (see Table 4 in O’Reilly et al. 2019). Robustness tests presented in our paper suggest that initial EOIR agreements were associated with a statistically significant decline in IFC bank deposits, but that this impact weakens over time – an indication that each new individual bilateral agreement is less significant in a growing multilateral network. The inclusion of a variable for voluntary disclosure programmes in the specification does not invalidate the negative impact of AEOI on foreign bank deposits. These findings are in line with other papers in the literature, including Casi et al. (2018) and Menkhoff and Miethe (2019).

The importance of an efficient and expanding global information exchange network reaches beyond tax transparency and revenue collection purposes. The post-Global Crisis era has been marked by a political and societal backlash against globalisation, and in many areas multilateralism has been on the retreat. In this climate, international cooperation on exchange of information demonstrates the importance of multilateral action in efforts to combat tax evasion, ensuring continued financial globalisation in a manner that is inclusive and sustainable. This success in fighting tax evasion should provide a source of encouragement to those seeking more ambitious multilateral cooperation in a range of other policy areas.


Bank for International Settlements (2013), “Reporting guidelines and practices for BIS international banking statistics”, Basel. 

Casi, E, C Spengel, and B Stage (2019), “Cross-Border Tax Evasion After the Common Reporting Standard: Game Over?”, ZEW Discussion Paper No. 18-036.

Elsayyad, M and K A Konrad (2012), “Fighting multiple tax heavens”, Journal of International Economics 86(2): 295-305.

Johannesen, N, and G Zucman (2014), “The end of bank secrecy? An evaluation of the G20 tax haven crackdown”, American Economic Journal: Economic Policy 6/1(B): 65-91.

Menkhoff, L, and J Miethe (2019), “Tax evasion in new disguise? Examining tax havens’ international bank deposits”, Journal of Public Economics 176: 53-78.

OECD (2019), Transparency and Exchange of Information for Tax Purposes: Multilateral Co-operation Changing the World. 10th Anniversary Report of the Global Forum on Transparency and Exchange of Information for Tax Purposes.

O’Reilly, P, K Parra Ramirez and M A Stemmer (2019), “Exchange of Information and Bank Deposits in International Financial Centres”, OECD Taxation Working Paper No. 46.


1 Bank deposits only refer to the non-bank category of the LBS and include deposits from households, corporates, governments and non-bank financial institutions, and are collected on the basis of immediate rather than ultimate ownership (Bank for International Settlements 2013).

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