Inequality in tax evasion: the case of the Spanish income tax

Abstract

Purpose The purpose of this paper is to estimate tax evasion and its impact on progressivity, redistribution and the measurement of inequality, using microdata from the Spanish income tax for 2001-2004. Design/methodology/approach The approach follows Feldman and Slemrod (2007) by exploiting the relation of charitable donations with the composition of income but introduces two methodological innovations, which could be useful for further studies: correction for sample selection with a Heckman two-step setting and the calculation of different evasion rates for top incomes with an interaction term. Findings Evasion in capital incomes was significant throughout these years. Financial incomes were reported at around 50-70 per cent of their real value, with the lowest estimates corresponding to the top decile. Revenues from fixed capital display similarly low compliance rates for the top 10 per cent. Tax evasion in self-employment incomes (direct assessment) is estimated at 20 per cent for 2001. Mostly because of a composition effect, this means that fraud was higher at the top of the income distribution, thus having a regressive impact. Inequality statistics and top income concentration estimates should, therefore, be revised upwards. Originality/value This is the first paper to estimate the distributive impacts of tax evasion in Spain, and one of very few internationally.

Tax Evasion and Inequality

“…Since more than 200 banks operated in Switzerland at the time of the leak, the market share of HSBC Private Bank was significant; it was likely to be among the top 10 largest Swiss banks. 8 Around $5.6 trillion of wealth was held in tax havens globally at the time of the Falciani leak; HSBC Switzerland alone accounted for 2.1 percent of that total. 9 Third, the available evidence suggests that HSBC was representative of the Swiss banking industry.…”

“…Online Appendix E provides detailed background information about HSBC Switzerland, the leak, and the data we got access to in his research. 8 Rankings of the world's largest private banks (or private banking divisions of large bank holding companies) are regularly published in trade magazines (e.g., Scorpio partnership). At the time of the leak, other major players in this market included UBS, Credit Suisse, Julius Baer, Pictet, Royal Bank of Scotland, BNP Paribas, etc.…”

Do public governance and patriotism matter? Sales tax compliance among small and medium enterprises in developing countries: Jordanian evidence

“…Tax expense is an operational cost that reduces company profits, so tax non-compliance is a way to increase reported profits (Bimo et al, 2019;Lee and Kao, 2018). Tax non-compliance is a critical problem worldwide (Ozili, 2020;Torregrosa-Hetland, 2020;Palil et al, 2016). This makes tax compliance a crucial issue for both governments and the public (Amoh and Adafula, 2019;Alon and Hagerman, 2013) and nations across the globe searching for additional revenues to achieve the needs of the public (Andreoni et al, 1998).…”

Korupsi Dan Kepatuhan Pajak: Peran Kontekstual Edukasi Wajib Pajak (Corruption and Tax Compliance: The Contextual Role of Taxpayer Education)

“…Secara global, ketidakpatuhan pajak dianggap sebagai masalah yang cukup krusial bagi pemerintah (Ozili, 2020;Palil et al, 2016;Torregrosa-Hetland, 2020). Hal ini membuat tindakan patuh wajib pajak menjadi perhatian bagi pemerintah di berbagai negara (Alon & Hageman, 2013;Amoh & Adafula, 2019).…”