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Is Cryptocurrency the New Haven for Tax Evaders? Exposé of Financial Secrecy in Tax Havens and Bitcoin Trading

Mark Ma, Assistant Professor of Accounting, Katz Graduate School of Business

Mark Ma
Mark Ma

Key Findings: This study examined if the Paradise Papers’ exposure of financial secrecy in tax havens significantly affects and predicts future cryptocurrency trading. Since Bitcoin offers greater anonymity than most other financial assets and its transactions are not regulated or monitored by authorities, the potential is much greater for illegal activities, such as evading taxes and money laundering. The research found cryptocurrency trading increased after financial secrets were revealed in 2017 in the Paradise Papers—a set of over 13.4 million confidential documents related to offshore investments. These findings suggest that tax evaders use cryptocurrency to further conceal their wealth after the revelation of their hidden wealth.

Recommendation: This research provides empirical evidence on the role of Bitcoin in tax evasion and highlights the importance for tax authorities to understand blockchain technology.

Researchers: Mark (Shuai) Ma and Congcong Li, Assistant Professor of Accounting at the Palumbo Donahue School of Business, Duquesne University.

Methodology: Empirical analyses include cross-country analyses of Bitcoin trading data from Coin Desk during the six weeks following the release of the Paradise Papers and a review of previous literature on cryptocurrency trading.

Additional Details: Presented at the 2022 American Accounting Association Mid-Atlantic Regional Meeting.