IFS Working Paper (WP18/07)

Voluntary disclosure schemes for offshore tax evasion

Date: 05 March 2018
Publisher: The IFS
JEL classification: H26, D85
DOI: 10.1920/wp.ifs.2018.W1807

Tax authorities worldwide are implementing voluntary disclosure schemes to recover tax on offshore investments. Such schemes are typically designed retrospectively following the bulk acquisition of information on offshore holdings, such as the recent “Paradise” and “Panama” papers. They offer an opportunity for affected taxpayers to make a voluntary disclosure, with reduced fine rates for truthful disclosure. We characterize the taxpayer/tax authority game with and without a scheme and show that a scheme increases net expected tax revenue, decreases illegal offshore investment, increases onshore investment, and could either increase or decrease total offshore investment (legal plus illegal).