Diana Ricciulli-Marín.

This paper studies the real economic consequences of offshore tax evasion by wealthy individuals. Exploiting an increase in the probability of detecting offshore wealth triggered by the 2016 Panama Papers leak, I find that Colombian firms owned by individuals using offshore vehicles increase retained earnings following the leak and use this additional liquidity to expand capital, leading to higher sales and net income two years later. These effects are larger among owner-managed firms, where shocks to owners are more likely to influence firm decisions. Higher net income also generates fiscal spillovers through increased corporate income tax revenues. These responses are economically meaningful: the additional net income represents between 0.12% and 0.3% of total value added in affected sectors. Overall, my findings show that offshore tax enforcement can stimulate domestic capital accumulation and firm growth, generating benefits beyond improved wealth tax compliance.