The network structure of global tax evasion evidence from the Panama papers

Keywords Tax evasion; Socio-economic networks; Game theory Abstract This paper builds on recent insights from network theory and on the rich dataset made available by the Panama Papers in order to investigate the micro-economic dynamics of tax-evasion. We model offshore financial entities documented in the Panama Papers as links between jurisdictions in the global network of tax evasion. A quantitative analysis shows that the resulting network, far from being a random collection of bilateral links, has key features of complex networks such as a core-periphery structure and a fat-tail degree distribution. We argue that these structural features imply that policy must adopt a systemic perspective to mitigate tax evasion. We offer three sets of insights from this perspective. First, we identify through centrality measures tax havens that ought to be priority policy targets. Second, we show that efficient tax treaties must contain exchange information clauses and link tax-havens to non-haven jurisdictions. Third, we show that the optimal deterrence strategies for a social-planner facing a strategic tax-evader in a Stackelberg competition can be characterized using the notion of Bonacich centrality. Author Affiliation: (a) Ca Foscari University of Venice and Paris 1 Pantheon-Sorbonne, France (b) Paris School of Economics and Paris 1 Pantheon-Sorbonne, France * Corresponding author. Article History: Received 3 November 2020; Revised 10 January 2022; Accepted 26 March 2022 (footnote)[white star] This project has received funding from the ITN ExSIDE European Union's Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie grant agreement No 721846 and from the ITN EPOC European Union's Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie grant agreement No 956107. Byline: Garcia Alvarado Fernando [fernando.garcia@unive.it] (a), Mandel Antoine [antoine.mandel@univ-paris1.fr] (*,b)