Taking the Long Way Home: U.S. Tax Evasion and Offshore Investments in U.S. Equity and Debt Markets
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Hanlon_Taking the.pdf
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588.23 KB
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Author(s)
Hanlon, Michelle
Maydew, Edward L.
Thornock, Jacob R.
Date Issued
January 2015
Journal
The Journal of Finance
Publisher
American Finance Association/Wiley
Citation
Hanlon, Michelle, Edward L. Maydew, and Jacob R. Thornock. “Taking the Long Way Home: U.S. Tax Evasion and Offshore Investments in U.S. Equity and Debt Markets.” The Journal of Finance 70, no. 1 (January 19, 2015): 257–287.
Version
Author's final manuscript
Abstract
We empirically investigate one form of illegal investor-level tax evasion and its effect on foreign portfolio investment. In particular, we examine a form of round-tripping tax evasion in which U.S. individuals hide funds in entities located in offshore tax havens and then invest those funds in U.S. securities markets. Employing Becker's (1968) economic theory of crime, we identify the tax evasion component by examining how foreign portfolio investment varies with changes in the incentives to evade and the risks of detection. To our knowledge, this is the first empirical evidence of investor-level tax evasion affecting cross-border equity and debt investment.
MIT Department
Sloan School of Management
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Creative Commons Attribution-Noncommercial-Share Alike
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DOI of Published Version
http://dx.doi.org/10.1111/jofi.12120
