Enforcing Wealth Taxes in the Developing World: Quasi-Experimental Evidence from Colombia

Juliana Londoño Vélez · Javier Ávila Mahecha

124 citations0/0 files storedAmerican Economic Review Insights

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Taxation and Compliance Studies Economic and Fiscal Studies Corporate Taxation and Avoidance

Abstract

This paper investigates the feasibility of wealth taxation in developing countries. It uses rich administrative data from Colombia and leverages a government-designed program for voluntary disclosures of hidden wealth as well as the threat of detection triggered by the Panama Papers leak. There are two key findings. First, there is substantial (primarily offshore) evasion: two-fifths of the wealthiest 0.01 percent evade taxes, with these evaders concealing one-third of their wealth offshore. Second, strengthening enforcement can have a significant impact on wealth tax compliance, tax revenue, and progressivity. These results highlight both challenges and opportunities for wealth taxation in the developing world. (JEL D31, G51, H24, H26, K34, O15)

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References

1972Income tax evasion: a theoretical analysis 2003Income Inequality in the United States, 1913-1998 2016Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data *2019Tax Compliance and Enforcement 2019Tax Evasion and Inequality 2018Who owns the wealth in tax havens? Macro evidence and implications for global inequality 2014The End of Bank Secrecy? An Evaluation of the G20 Tax Haven Crackdown 2019Consumers as Tax Auditors

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