publication . Research . Preprint . 2001

On the Relation between Tax Rates and Evasion in a Multi-period Economy

Caballé, Jordi; Panadés Martí, Judith; Universitat Autònoma de Barcelona. Unitat de Fonaments de l'Anàlisi Econòmica; Universitat Autònoma de Barcelona. Institut d'Anàlisi Econòmica;
Open Access English
  • Published: 23 Oct 2001
  • Country: Spain
Abstract
We extend the basic tax evasion model to a multi-period economy exhibiting sustained growth. When individuals conceal part of their true income from the tax authority, they face the risk of being audited and hence of paying the corresponding fine. Both taxes and fines determine individual saving and the rate of capital accumulation. In this context we show that the sign of the relation between the level of the tax rate and the amount of evaded income is the same as that obtained in static setups. Moreover, high tax rates on income are typically associated with low growth rates as occurs in standard growth models that disregard the tax evasion phenomenon.
Subjects
Medical Subject Headings: health care economics and organizations
free text keywords: Tax Evasion, Growth, Impostos Evasió Models economètrics, Impostos -- Evasió -- Models economètrics, Tax evasion, Growth, jel:H26, jel:E62, jel:O41

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publication . Research . Preprint . 2001

On the Relation between Tax Rates and Evasion in a Multi-period Economy

Caballé, Jordi; Panadés Martí, Judith; Universitat Autònoma de Barcelona. Unitat de Fonaments de l'Anàlisi Econòmica; Universitat Autònoma de Barcelona. Institut d'Anàlisi Econòmica;