Keywords
tax evasion, round-tripping, foreign investment
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 investorlevel tax evasion affecting cross-border equity and debt investment.
Original Publication Citation
“Taking the Long Way Home: U.S. Tax Evasion and Offshore Investments in U.S. Equity and Debt Markets” (with Michelle Hanlon and Edward Maydew). Journal of Finance (2015) 70: 257-287.
BYU ScholarsArchive Citation
Hanlon, Michelle; Maydew, Edward L.; and Thornock, Jacob, "Taking the Long Way Home: U.S. Tax Evasion and Offshore Investments in U.S. Equity and Debt Markets" (2015). Faculty Publications. 8586.
https://scholarsarchive.byu.edu/facpub/8586
Document Type
Peer-Reviewed Article
Publication Date
2015
Publisher
Journal of Finance
Language
English
College
Marriott School of Business
Department
Accountancy
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