Tax havens aren’t dead. They’ve just moved.

Research from Niels Johannesen of the University of Copenhagen and Gabriel Zucman of the Paris School of Economics looks at the result ofinternational agreements taken to prevent tax evasion in the wake of the global financial crisis. The results are not very encouraging for reformers:

First, treaties have had a statistically significant but quite modest impact on bank deposits in tax havens: a treaty between say France and Switzerland causes an approximately 11% decline in the Swiss deposits held by Frenchresidents. Second, and more importantly, the treaties signed by tax havens have not triggered significant repatriations of funds, but rather a relocation of deposits between tax havens. We observe this pattern in the aggregate data: the global value of deposits in havens remains the same two years after the start of the crackdown, but the havens that have signed many treaties have lost deposits at the expense of those that have signedfew. We also observe this pattern in the bilateral panel regressions: after say France and Switzerland sign a treaty, French deposits increase in havens that have no treaty with France.

Some of the winners and losers in this trend are mapped here:

Johannesen and Zucman suggests their finding lend support to a “big bang” multilateral agreement on tax havens rather than an incremental approach, though it seems like it would be nearly impossible to wrangle an agreement big enough to make a difference.

Update: Here’s a very interesting response from E.J. Fagan at the Task Force on Financial Integrity & Economic Development, who says I’m too pessimistic about the prospects for global action on this issue.