Efficient black markets?

Davidson, Carl; Martin, Lawrence; Wilson, John D.

doi:10.1016/j.jpubeco.2006.10.009

“…Davidson, Martin and Wilson (2003) suggest that shadow transactions may increase welfare. They argue in the experience goods framework that by allowing agents to self-select into the black market, the government can target tax breaks to transactions involving low-quality goods.…”

Section: Theoretical Workmentioning

confidence: 99%

Methodology of Quantitative Estimation of Non-Observed Economy at the Regional Level on the Basis of the Branch Structure of Gross Added Value

Kakaulina¹

2018

BUrFU

3

0

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This paper introduces a theory of the mechanisms and determinants of why some markets are prone to develop shadow economies. It tests the suggested hypotheses using data on 21 developed OECD countries for 1989/90 -2002/03. The econometric results provide support for the proposed determinants of shadow economies, including taxation, social security and the tax moral variables. Using the MIMIC method, we find that the estimated average size of the shadow economy relative to the official GDP was 13.2 per cent in 1989/90, rising to 16.8 per cent in 1999/2000. The results allow us to classify the OECD sample into economies with large, medium-sized, and moderate shadow economies.

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“…However, one line in the literature claims that, under specific circumstances, tax evasion may be welfare improving. For an analysis of the welfare consequences of fighting tax evasion, see Davidson et al (2007) and section 7 of Cowell (1985). declared) cash payments and legal transactions, and offering a discount for cash payments.…”

Section: Introductionmentioning

confidence: 99%

“…For an analysis of the welfare consequences of fighting tax evasion, see Davidson et al . () and section 7 of Cowell ().…”

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confidence: 99%

Itemised Deductions: A Device to Reduce Tax Evasion

Piolatto

¹

2015

German Economic Review

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With direct incentives and sanctions being the most common instruments to fight tax evasion, the theoretical literature has tended to overlook indirect schemes, such as itemised deductions, in which one agent's behaviour affects the likelihood that others will declare their revenue. Itemised deductions provide an incentive for consumers to declare their purchases. This induces a partial shift in the demand from the black market to the legal one, for consumers need a transaction receipt to enjoy the tax deduction. I show that it is possible to increase tax proceeds by choosing a suitable level of itemised deduction, and this, for any level of taxation. Indeed, the cost for the tax authority on the consumers' side is more than compensated for by the extra proceeds generated on the sellers' side.JEL Classification: H00; H20; H26; H30

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“…However, one line in the literature claims that, under specific circumstances, tax evasion may be welfare improving. For an analysis of the welfare consequences of fighting tax evasion, see Davidson et al (2007) and section 7 of Cowell (1985).…”

Section: Introductionmentioning

confidence: 99%

Itemised Deductions: A Device to Reduce Tax Evasion

Piolatto

¹

2010

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With direct incentives and sanctions being the most common instruments to fight tax evasion, the theoretical literature has tended to overlook indirect schemes, such as itemised deductions, in which one agent's behaviour affects the likelihood that others will declare their revenue. Itemised deductions provide an incentive for consumers to declare their purchases. This induces a partial shift in the demand from the black market to the legal one, for consumers need a transaction receipt to enjoy the tax deduction. I show that it is possible to increase tax proceeds by choosing a suitable level of itemised deduction, and this, for any level of taxation. Indeed, the cost for the tax authority on the consumers' side is more than compensated for by the extra proceeds generated on the sellers' side.JEL Classification: H00; H20; H26; H30

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Efficient black markets?

Cited by 19 publications

References 24 publications

Methodology of Quantitative Estimation of Non-Observed Economy at the Regional Level on the Basis of the Branch Structure of Gross Added Value

Methodology of Quantitative Estimation of Non-Observed Economy at the Regional Level on the Basis of the Branch Structure of Gross Added Value

Itemised Deductions: A Device to Reduce Tax Evasion

Itemised Deductions: A Device to Reduce Tax Evasion

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