publication . Article . 2007

Tax Rates, Tax Evasion, and Growth in a Multi-period Economy

Caballe, Jordi; Judith Panades;
Open Access
  • Published: 01 Jan 2007 Journal: Hacienda Pública Española/Revista de Economía Pública, issue 4 december, pages 67-80
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. We show that, if the penalty imposed on tax evaders is proportional to the amount of evaded taxes, then the growth rate is decreasing in the tax rate. However, the relationship between growth and tax rate becomes non-monotonic when the penalty rate is imposed on the amount of evaded income.
Subjects
Medical Subject Headings: health care economics and organizations
free text keywords: Tax evasion, Growth, jel:H26, jel:E62, jel:O41
22 references, page 1 of 2

Allingham, M. and A. Sandmo (1972). “Income Tax Evasion: A Theoretical Analysis.” Journal of Public Economics 1, 323-338.

Arrow, K. (1970). Essays in the Theory of Risk Bearing. North Holland. Amsterdam.

Barro, R.. (1990). “Government Spending in a Simple Model of Endogenous Growth.” Journal of Political Economy 98, S103-S125. [OpenAIRE]

Caballé, J. and J. Panadés (1997). “Tax Evasion and Economic Growth.” Public Finance / Finances Publiques 52, 318-340 (Published 2000).

Caballé, J. and J. Panadés (2005). “Cost Uncertainty and Taxpayer Compliance”. International Tax and Public Finance 12, 239-263.

Chen, B.L. (2003). “Tax Evasion in a Model of Endogenous Growth.” Review of Economic Dynamics 6, 381-403.

Clotfelter, C. (1983). “Tax Evasion and Tax Rates: An Analysis of Individual Returns.” Review of Economics and Statistics 65, 363-373.

Cowell, F.A. and J.P.F. Gordon (1988). “Unwillingness to Pay: Tax Evasion and Public Good Provision.” Journal of Public Economics 36, 305-321.

Crane, S. and F. Nourzad (1986). “Inflation and Tax Evasion: an Empirical Analysis.” Review of Economics and Statistics 68, 217-223. [OpenAIRE]

Hakansson, N.H. (1970). “Optimal Investment and Consumption Strategies under Risk for a Class of Utility Functions.” Econometrica 38, 587-607. [OpenAIRE]

Joulfain, D. and M. Rider (1996). “Tax Evasion in Presence of Negative Income Taxes.” National Tax Journal 49, 553-570. [OpenAIRE]

Landskroner, Y., J. Paroush, and I. Swary (1990). “Tax Evasion and Portfolio Decisions.” Public Finance / Finances Publiques 45, 409-422.

Lee, K. (2001). “Tax Evasion and Self-Insurance.” Journal of Public Economics 81, 73-81.

Panadés, J. (2001). “Tax Evasion and Ricardian Equivalence.” European Journal of Political Economy 17, 799-815.

Panadés, J. (2004). “Tax Evasion and Relative Tax Contribution.” Public Finance Review 32, 183-195. [OpenAIRE]

22 references, page 1 of 2
Powered by OpenAIRE Research Graph
Any information missing or wrong?Report an Issue