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

Juliana Londoño-Vélez and Javier Ávila-Mahecha

American Economic Review: Insights, 2021, vol. 3, issue 2, 131-48

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-codes: D31 G51 H24 H26 K34 O15 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1257/aeri.20200319

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