Top Income Tax Evasion and Redistribution Preferences: Evidence from the Panama Papers

Abstract

This paper provides empirical evidence that, after fiscal scandals, individuals substantially revise their views on redistribution. I exploit as a quasi-natural experiment the 2016 Panama Papers scandal which revealed top-income tax evasion behaviour simultaneously worldwide. The empirical investigation relies on two original sources of data: a longitudinal dataset on United Kingdom households and a survey conducted in twenty-two European countries. Using a difference-in-differences strategy, I find an increase in pro-redistribution statements post-scandal ranging between 2% and 3.3%. Responses are heterogeneous on income levels and on political affiliations, with larger responses from right-wing individuals. The change in redistribution preferences is moderately translated into votes: I find an increase in voting intentions for the left and negative for the right-wing parties. Complementary estimations at the European-level indicate that pro-redistribution responses increase with media coverage and shock intensity (i.e., number of individuals involved).