Tax evasion and financial accelerator: A corporate sector analysis for the US business cycle

Noncompliant behaviors in general equilibrium: A survey

“…To avoid any ex ante comovement between the two sectors, she assumes that, first, reported and unreported hours worked are separable in the utility function and, second, leisure is allocated in both sectors. Accordingly, Chiarini et al (2022) show that, if the underground economy and financial frictions interact, the underground sector is procyclical, and NCBs strengthen the effects of the financial accelerator, considerably amplifying macroeconomic fluctuations. 6 They investigate the effects of willful tax noncompliance in the US corporate sector in the presence of financial frictions.…”

“…In other words, the probability of detection increases with the size of the informal sector and with tax revenue. Chiarini et al (2022) endogenize the probability of detection for tax evaders and assume that it is an increasing function of aggregate entrepreneurial production.…”

“…The empirical evidence not only identifies financial frictions as important determinants of NCBs (Bose et al, 2012;Beck et al, 2014) but also documents reverse causality, in which a large shadow economy limits financial development (Giombini et al, 2018). This fact has encouraged researchers to investigate the interaction between NCBs and financial imperfections over the business cycle (Colombo et al, 2019;Chiarini et al, 2020Chiarini et al, , 2022among others).…”

“…In fact, credit-constrained agents, by means of tax evasion, might accumulate internal funds as a substitute for external finance. Following this perspective, in a mediumscale new Keynesian model augmented with the financial accelerator à la Bernanke et al (1999), Chiarini et al (2020Chiarini et al ( , 2022 stress the self-financing interpretation of tax evasion that provides the entrepreneur (the agent with credit limits) with financial resources in addition to his or her own net worth and an alternative to bank loans to make investments. In this context, when a recessionary demand shock hits the economy, underground production declines because of its greater flexibility to disinvest, with nonnegligible effects on the business cycle.…”

Income tax compliance behavior of businesses: The case of Vietnam

“…The state has the ability to collect more taxes and can therefore fund the country's welfare and infrastructure programs. However, improving the business environment and improving the tax system and legal basis with the potential to increase tax collection and tax compliance for businesses has not been done through previous studies, and therefore is the research objective in this article (Chiarini et al, 2022).…”