Tax Rates, Tax Evasion, and Growth in a Multi-period Economy
AbstractWe extend the basic tax evasion model to a multi-period economy exhibiting sustained growth. When individuals conceal part of their true income from the tax authority, they face the risk of being audited and hence of paying the corresponding fine. Both taxes and fines determine individual saving and the rate of capital accumulation. We show that, if the penalty imposed on tax evaders is proportional to the amount of evaded taxes, then the growth rate is decreasing in the tax rate. However, the relationship between growth and tax rate becomes non-monotonic when the penalty rate is imposed on the amount of evaded income.
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Bibliographic InfoArticle provided by IEF in its journal Hacienda Pública Española/Revista de Economía Pública.
Volume (Year): 183 (2007)
Issue (Month): 4 (december)
Tax evasion; Growth;
Find related papers by JEL classification:
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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