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The excess burden of tax evasion--An experimental detection-concealment contest Author info | Abstract | Publisher info | Download info | Related research | Statistics Bayer, Ralph-C
Sutter, Matthias
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Tax evasion may cause social welfare losses due to the incentives of taxpayers to invest in the concealment and of tax authorities to invest in the detection of tax evasion. Reducing the investment of both parties at the same time would then lead to a Pareto improvement. Given that concealment and detection costs are hardly measurable in reality, we show in a controlled laboratory experiment that the welfare losses from a concealment-detection contest depend positively on the prevailing tax rate, but not on the penalty which is imposed in case of detected tax evasion. Hence, policy makers who are concerned about socially inefficient concealment and enforcement costs should focus on tax rates rather than penalty rates.
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Article provided by Elsevier in its journal European Economic Review .
Volume (Year): 53 (2009)
Issue (Month): 5 (July)
Pages: 527-543
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Handle: RePEc:eee:eecrev:v:53:y:2009:i:5:p:527-543Contact details of provider: Web page: http://www.elsevier.com/locate/eer
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Keywords: Tax evasion Concealment Detection Tax rates Penalty rates Experiment ; Other versions of this item:
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Full
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Ratbek Dzhumashev & Emin Gahramanov, 2008.
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