Enforcing wealth taxes in the developing world quasi-experimental evidence from Colombia Juliana Londoño-Vélez and Javier Ávila-Mahecha
By: Londoño Vélez, Juliana
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Contributor(s): Ávila Mahecha, Javier.
Material type: 
ArticlePublisher: 2021Subject(s): IMPUESTO SOBRE EL PATRIMONIO | EVASION FISCAL | CUMPLIMIENTO FISCAL | ESFUERZO FISCAL | PAISES EN DESARROLLO | COLOMBIA
In:
The American Economic Review v. 3, n. 2, June 2021, p. 131-148Summary: 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.
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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.
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