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Tax Evasion in Firms

Author

Listed:
  • Erling Barth
  • Tone Ognedal

Abstract

Tax evasion is low in many countries because third†party reporting makes employees unable to cheat. Why do not employees collude with their employer to evade taxes or evade as self†employed? We explain this puzzle in a model in which employees have both options. A trade†off between large†scale efficient production and tax evasion implies that tax evasion per employee is decreasing in firm size. The model predicts that there is a gap between the individually and the collectively optimal evasion in firms and that this gap is increasing in firm size. Using survey data, we find support for both predictions.

Suggested Citation

  • Erling Barth & Tone Ognedal, 2018. "Tax Evasion in Firms," LABOUR, CEIS, vol. 32(1), pages 23-44, March.
    • Handle: RePEc:bla:labour:v:32:y:2018:i:1:p:23-44
    DOI: 10.1111/labr.12111
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    Cited by:

    1. Calijuri, Mónica & Pessino, Carola & López-Luzuriaga, Andrea & Schächtele, Simeon & González, Ubaldo & Chamorro, Carla, 2023. "Detecting Envelope Wages with E-billing Information," IDB Publications (Working Papers) 12912, Inter-American Development Bank.
    2. Andrea Lopez-Luzuriaga & Monica Calijuri & Carola Pessino & Simeon Schächtele & Ubaldo Gonzalez & Carla Chamorro, 2024. "Detecting envelope wages with e-billing information," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(1), pages 26-65, February.
    3. Giovanna Vallanti & Giuseppina Gianfreda, 2021. "Informality, regulation and productivity: do small firms escape EPL through shadow employment?," Small Business Economics, Springer, vol. 57(3), pages 1383-1412, October.

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