American Economic Review: Insights
ISSN 2640-205X (Print) | ISSN 2640-2068 (Online)
Enforcing Wealth Taxes in the Developing World: Quasi-experimental Evidence from Colombia
American Economic Review: Insights
vol. 3,
no. 2, June 2021
(pp. 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.Citation
Londoño-Vélez, Juliana, and Javier Ávila-Mahecha. 2021. "Enforcing Wealth Taxes in the Developing World: Quasi-experimental Evidence from Colombia." American Economic Review: Insights, 3 (2): 131–48. DOI: 10.1257/aeri.20200319Additional Materials
JEL Classification
- D31 Personal Income, Wealth, and Their Distributions
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H26 Tax Evasion and Avoidance
- K34 Tax Law
- O15 Economic Development: Human Resources; Human Development; Income Distribution; Migration