Income tax evasion: tax elasticity, welfare, and revenue

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F67985998%3A_____%2F21%3A00544511" target="_blank" >RIV/67985998:_____/21:00544511 - isvavai.cz</a>

Result on the web

<a href="https://doi.org/10.1007/s10797-020-09632-3" target="_blank" >https://doi.org/10.1007/s10797-020-09632-3</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1007/s10797-020-09632-3" target="_blank" >10.1007/s10797-020-09632-3</a>

Result language

angličtina

Original language name

Income tax evasion: tax elasticity, welfare, and revenue

Original language description

This paper provides a general equilibrium model of income tax evasion. As functions of the share of income reported, the paper contributes an analytic derivation of the tax elasticity of taxable income, the welfare cost of the tax, and government revenue as a percent of output. It shows how an increase in the tax rate causes the tax elasticity and welfare cost to increase in magnitude by more than with zero evasion. Keeping constant the ratio of income tax revenue to output, as shown to be consistent with certain US evidence, a rising productivity of the goods sector induces less evasion and thereby allows tax rate reduction. The paper derives conditions for a stable share of income tax revenue in output with dependence upon the tax elasticity of reporting income. Examples are provided with less and more productive economies in terms of the tax elasticity of reported income, the welfare cost of taxation and the tax revenue as a percent of output, with sensitivity analysis with respect to leisure preference and goods productivity. Discussion focuses on how the tax evasion analysis may help explain such fiscal tax policy as the postwar US income tax rate reductions along with discussion of government fiscal multipliers. Fiscal policy with tax evasion included shows how tax rate reduction induces less tax evasion, a lower welfare cost of taxation, and makes for a stable income tax share of output.

Czech name

—

Czech description

—

Type

J_imp - Article in a specialist periodical, which is included in the Web of Science database

CEP classification

—

OECD FORD branch

50201 - Economic Theory

Project

—

Continuities

I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Publication year

2021

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

International Tax and Public Finance

ISSN

0927-5940

e-ISSN

1573-6970

Volume of the periodical

28

Issue of the periodical within the volume

3

Country of publishing house

NL - THE KINGDOM OF THE NETHERLANDS

Number of pages

34

Pages from-to

533-566

UT code for WoS article

000584008100001

EID of the result in the Scopus database

2-s2.0-85094120898