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A Game Theoretic Approach to Cross-Border VAT Evasion within EU Member States and its Relationship with the Black Economy

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  • Silvia Fedeli

    ()
    (Universita’ di Roma “La Sapienza”, Department of Economics and Law, Via del Castro Laurenziano, 9, 00161 Roma – Italy)

  • F. Forte

    (Universita’ di Roma “La Sapienza”, Department of Economics and Law, Via del Castro Laurenziano, 9, 00161 Roma – Italy)

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    Abstract

    The interruption of the VAT chain at national borders makes several types of tax fraud possible. One is the multi stages black VAT chain in the domestic markets of various countries, which facilitates the development of a black economy favouring the evasion of income tax, social security contributions and other market regulations, including the protection of intellectual property and of brands. We devise a stylised model of Nash equilibrium-black chain for the “VAT-free goods”, depicting its effects on both market prices and illegal gains for fraudsters. The policy implications of the model aiming to contrast the black economy are analysed.

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    Bibliographic Info

    Article provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).

    Volume (Year): 42 (2012)
    Issue (Month): 2 (September)
    Pages: 209-220

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    Handle: RePEc:eap:articl:v:42:y:2012:i:2:p:209-220

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    Related research

    Keywords: VAT evasion; Direct tax evasion; Nash equilibrium-black chain;

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Silvia Fedeli & Francesco Forte, 2011. "EU VAT frauds," European Journal of Law and Economics, Springer, vol. 31(2), pages 143-166, April.
    2. Marrelli, Massimo, 1984. "On indirect tax evasion," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 181-196, November.
    3. Fedeli, Silvia & Forte, Francesco, 1999. "Joint income-tax and VAT-chain evasion," European Journal of Political Economy, Elsevier, vol. 15(3), pages 391-415, September.
    4. Marrelli, M. & Martina, R., 1988. "Tax evasion and strategic behaviour of the firms," Journal of Public Economics, Elsevier, vol. 37(1), pages 55-69, October.
    5. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
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    Cited by:
    1. Silvia Fedeli & Francesco Forte, 2012. "Border Tax Adjustment without Borders: The EU Carousel of VAT Fraud," Review of Economics & Finance, Better Advances Press, Canada, vol. 2, pages 55-70, November.

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