Tax Amnesties and the Self-Selection of Risk-Averse Taxpayers

Abstract

In this paper we model taxpayers participation in an unexpected tax amnesty, which can be entered by paying a fixed amount. Taxpayers are characterized by a Constant Relative Risk Aversion (CRRA) utility function and differ in relative risk aversion coefficient and in income. We show that amnesties may fail as a self-selective device to fully separate big from small evaders and to extract resources from the former. Only taxpayers whose relative risk aversion falls within a given interval participate, while those whose evasion is too small or too large do not enter. The model is used to estimate relative risk aversion and tax evasion of participants in 1991 and 1994 Italian income tax amnesties.

Tax amnesty and company value: Testing tax avoidance as an intervening variable

“…Participants in the tax forgiveness program have made mistakes, and the program is seen as an opportunity to temporarily alleviate the burden of tax errors; however, there is a possibility that participants will replicate this mistake in the future (Marchese & Privileggi, 1999). Marchese and Privileggi (2004) explored participants making tax There are no sources in the current document foreclosed companies. MacNair (2009) asserts that expropriation not only occurs to companies but can be done by the state.…”