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Tax evasion and the allocation of capital

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  • Fullerton, Don
  • Karayannis, Marios

Abstract

The efficiency cost of capital misallocations between the corporate sector and the noncorporate sector is typically measured using statutory tax differences. Corporate-source income tax compliance is high because of third party reporting, however, while noncorporate rental income tax compliance is low. Differential evasion thus exacerbates statutory differences and enlarges the efficiency cost. To measure this effect, we build a numerical general equilibrium model where households simultaneously choose portfolios of risky assets and fractions of income to report.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 55 (1994)
Issue (Month): 2 (October)
Pages: 257-278

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Handle: RePEc:eee:pubeco:v:55:y:1994:i:2:p:257-278

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Web page: http://www.elsevier.com/locate/inca/505578

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References

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  1. Joel Slemrod & Shlomo Yitzhaki, 1985. "The Optimal Size of a Tax Collection Agency," NBER Working Papers 1759, National Bureau of Economic Research, Inc.
  2. Klepper, Steven & Nagin, Daniel, 1989. "The Anatomy of Tax Evasion," Journal of Law, Economics and Organization, Oxford University Press, vol. 5(1), pages 1-24, Spring.
  3. Polinsky, Mitchell & Shavell, Steven, 1979. "The Optimal Tradeoff between the Probability and Magnitude of Fines," American Economic Review, American Economic Association, vol. 69(5), pages 880-91, December.
  4. Joel B. Slemrod, 1983. "A General Equilibrium Model of Taxation with Endogenous Financial Behavior," NBER Chapters, in: Behavioral Simulation Methods in Tax Policy Analysis, pages 427-458 National Bureau of Economic Research, Inc.
  5. Joel Slemrod, 1982. "Tax Effects on the Allocation of Capital Among Sectors and Among Individuals: A Portfolio Approach," NBER Working Papers 0951, National Bureau of Economic Research, Inc.
  6. Don Fullerton & Andrew B. Lyon, 1988. "Tax Neutrality and Intangible Capital," NBER Chapters, in: Tax Policy and the Economy: Volume 2, pages 63-88 National Bureau of Economic Research, Inc.
  7. Mervyn A. King & Don Fullerton, 1983. "The Taxation of Income from Capital: A Comparative Study of the U.S., U.K., Sweden, and West Germany--The Theoretical Framework--," NBER Working Papers 1058, National Bureau of Economic Research, Inc.
  8. Fullerton, Don & Mackie, James B. III, 1989. "Economic Efficiency in Recent Tax Reform History: Policy Reversals or Consistent Improvements?," National Tax Journal, National Tax Association, vol. 42(1), pages 1-13, March Cit.
  9. Landskroner, Yoram & Muller, Eitan & Swary, Itzhak, 1991. "Tax evasion and financial equilibrium," Journal of Economics and Business, Elsevier, vol. 43(1), pages 25-35, February.
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Citations

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Cited by:
  1. Frank A Cowell, 2003. "Sticks and Carrots," STICERD - Distributional Analysis Research Programme Papers 68, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  2. Been-Lon Chen, 2003. "Tax Evasion in a Model of Endogenous Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(2), pages 381-403, April.
  3. Wolfram F. Richter, 2007. "Geplante Steuerhinterziehung und ihre effiziente Bestrafung," RWI Materialien, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, pages 31, 08.

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