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Tax Evasion and Information Production: Evidence from the FATCA

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753
Author
Si Cheng Massimo Massa Hong Zhang
Category
Financial
Date Posted
2020/08/31
Date Retrieved
2023/01/23
Date Revised
2023/01/23
Date Written
2023/01/18
Description
We examine how tax evasion affects offshore information production. Using the Foreign Account Tax Compliance Act (FATCA) as an exogenous shock we document that affected offshore asset management companies significantly enhance their performance as a response. This improvement comes from better information processing and is more substantial for tax-sensitive companies. Other policies related to fees and portfolio-based tax management are less affected. Our results reveal a novel substitution effect between tax evasion and information production suggesting that curbing offshore tax evasion can help improve competitiveness and efficiency in the global asset management industry and related markets.
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JEL Classifications
F36 G15 G23 H26
Keywords
tax evasion; FATCA; asset management; market efficiency
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Pages
67
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