The Theoretical Analysis of Income Tax Evasion Revisited
AbstractThere exists an important puzzle in the income tax evasion literature, that higher tax rates unambiguously encourage tax compliance (Yitzhaki?s (1974) result). In this paper I show that by simply relaxing the assumption that higher tax rates necessarily translate into higher penalty payments at the initial optimum when caught, it is possible to generate rigorously an important extra disincentive to compliance, which is absent from the previous works. It can also be shown that Yitzhaki's (1974) result is a special case of the present formulation.
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Bibliographic InfoArticle provided by Economic Issues in its journal Economic Issues.
Volume (Year): 14 (2009)
Issue (Month): 1 (March)
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- Yaniv, Gideon, 1999. "Tax Compliance and Advance Tax Payments: A Prospect Theory Analysis," National Tax Journal, National Tax Association, vol. 52(n. 4), pages 753-64, December .
- Alm, James & Bahl, Roy & Murray, Matthew N., 1993. "Audit selection and income tax underreporting in the tax compliance game," Journal of Development Economics, Elsevier, vol. 42(1), pages 1-33, October.
- Crane, Steven E. & Nourzad, Farrokh, 1990. "Tax Rates and Tax Evasion: Evidence from California Amnesty Data," National Tax Journal, National Tax Association, vol. 43(2), pages 189-99, June Cita.
- Cebula, Richard & Coombs, Christopher, 2008. "Do Government-Spending-Induced Deficits Lower Tax Compliance?," MPRA Paper 50121, University Library of Munich, Germany, revised 18 Apr 2009.
- Cebula, Richard, 2010.
"New and Current Evidence on Determinants of Aggregate Federal Personal Income Tax Evasion in the United States,"
49434, University Library of Munich, Germany.
- Richard J. Cebula, 2013. "New and Current Evidence on Determinants of Aggregate Federal Personal Income Tax Evasion in the United States," American Journal of Economics and Sociology, Wiley Blackwell, vol. 72(3), pages 701-731, 07.
- Cebula, Richard J., 2011. "Aggregate Income Tax Evasion: Empirical Results Using new IRS Data for the U.S. - L’evasione aggregata del reddito: risultati empirici ottenuti utilizzando i nuovi dati IRS per gli USA," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 64(4), pages 423-443.
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