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Income Tax Evasion, Inequality and Poverty

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  • Panos Pashardes

    ()
    (Department of Economics and Economics Research Centre, University of Cyprus)

  • Alexandros Polycarpou

    (Economics Research Centre, University of Cyprus)

Abstract

This paper uses a consumer demand based method to estimate the extent to which households in Cyprus under-report their income from self-employment, capital income and income from agriculture. On the basis of these estimates, the size of black economy appears to be around 7–8% of GDP. We find that income under-reporting biases measures of inequality and poverty downwards, suggesting that egalitarian and antipoverty policies need to become more generous, but also more carefully targeted to avoid false entitlement to social benefits. The high tax free income undoubtedly helps reduce the size of the tax evasion problem in Cyprus.

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Bibliographic Info

Article provided by University of Cyprus, Economics Research Centre in its journal Cyprus Economic Policy Review.

Volume (Year): 2 (2008)
Issue (Month): 2 (December)
Pages: 37-49

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Handle: RePEc:erc:cypepr:v:2:y:2008:i:2:p:37-49

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Keywords: Income under-reporting; black economy; tax free income; Cyprus;

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Cited by:
  1. Manos Matsaganis & Chrysa Leventi & Maria Flevotomou, 2012. "The Crisis and Tax Evasion in Greece: What are the Distributional Implications?," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 13(2), pages 26-32, 07.
  2. Efthymiou, Leonidas & Michael, Sophia, 2013. "When Cards and ATM’s are the only choice: A fortnight in Cyprus with no banking system, nor trust," MPRA Paper 50646, University Library of Munich, Germany.
  3. Matsaganis, Manos & Benedek, Dóra & Flevotomou, Maria & Lelkes, Orsolya & Mantovani, Daniela & Nienadowska, Sylwia, 2010. "Distributional implications of income tax evasion in Greece, Hungary and Italy," MPRA Paper 21465, University Library of Munich, Germany.
  4. Manos Matsaganis & Maria Flevotomou, 2010. "Distributional Implications of Tax Evasion in Greece," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 31, Hellenic Observatory, LSE.
  5. Christos Koutsampelas, 2011. "Social transfers and income distribution in Cyprus," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 5(2), pages 35-55, December.
  6. Manos Matsaganis & Maria Flevotomou, 2010. "Distributional implications of tax evasion in Greece," LSE Research Online Documents on Economics 26074, London School of Economics and Political Science, LSE Library.
  7. repec:ese:emodwp:em17-13 is not listed on IDEAS

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