Tax evasion and the allocation of capital

Fullerton, Don; Karayannis, Marios

doi:10.1016/0047-2727(94)90054-x

Cited by 10 publications

(3 citation statements)

References 18 publications

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“…Therefore, we set the audit rate in such a manner. Later, we confirm the robustness of our results for a range of q, including q = 0.089, the value adopted by Fullerton and Karayannis (1994).…”

Section: Calibrationsupporting

confidence: 85%

“…At a glance, this is likely to damage public service provision. However, at the same time, such an increase in tax evasion holds the tax base, N t ∫ π i,t dF (b) = (1 − αΘ −1 )αY t 17. Except for the effect of CIT evasion, there exist general equilibrium effects in our model.…”

mentioning

confidence: 85%

“…In particular, consider q = 0.089. This is the value chosen inFullerton and Karayannis (1994). Table5shows that the results do not change for the benchmark parameter (other than q).…”

mentioning

confidence: 98%

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Tax evasion and optimal corporate income tax rates in a growing economy

2022

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We explore how tax evasion by firms affects the growth- and welfare-maximizing rates of corporate income tax (CIT) in an endogenous growth model with productive public service. We show that the negative effect of CIT on growth is mitigated in the presence of tax evasion. This increases the benefit of raising the CIT rate for public service provision. Thus, in contrast to Barro [(1990) Journal of Political Economy 98, 103–125], the optimal tax rate is higher than the output elasticity of public service. Through numerical exercises, we demonstrate that the role of tax evasion by firms is quantitatively significant.

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Section: Calibrationsupporting

confidence: 85%

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confidence: 85%

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Tax evasion and optimal corporate income tax rates in a growing economy

2022

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Optimal tax policy under tax evasion

Economides

Philippopoulos

Ρίζος

2019

Int Tax Public Finance

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Dynamic tax evasion and growth with heterogeneous agents

Menoncin,

Modena

2024

J Econ Interact Coord

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We develop a tractable model economy in which public capital improves aggregate productivity, and the taxpayers have heterogeneous evasion opportunities. By issuing bonds, compliant taxpayers supply the evaders with an instrument to hedge against auditing risks, thereby expanding their evasion capacity. The wealth share of tax evaders relates negatively to the economy’s productivity but has a hump-shaped relationship with the growth rate of aggregate capital. The fiscal policy that maximizes welfare differs from the one that maximizes tax revenues because the latter does not account for the redistribution of wealth (and risk) between compliant and evasive taxpayers.

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Tax evasion and the allocation of capital

Cited by 10 publications

References 18 publications

Tax evasion and optimal corporate income tax rates in a growing economy

Tax evasion and optimal corporate income tax rates in a growing economy

Optimal tax policy under tax evasion

Dynamic tax evasion and growth with heterogeneous agents

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