publication . Article . 2004

Tax Evasion and Relative Tax Contribution

Judith Panadés;
Open Access
  • Published: 27 May 2004 Journal: Public Finance Review, volume 32, pages 183-195 (issn: 1091-1421, eissn: 1552-7530, Copyright policy)
  • Publisher: SAGE Publications
This article analyzes the relationship between tax rate levels and tax evasion in a context where the utility of a taxpayer depends on both his or her own consumption and relative position with respect to the average declared income of the economy. In this framework, if the taxpayer declares an amount of his or her income greater (smaller) than the average of the economy, that person’s utility will decrease (increase). The author shows that, if the externality from the others’ declared income is taken into account, several equilibria arise in the economy. Then, an increase in the tax rate leads to a larger amount of unreported income at the equilibrium displ...
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