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Corruption, Tax Evasion and the Laffer Curve

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Author Info
 Sanyal, Amal
Gang, Ira N
Goswami, Omkar

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Abstract

In a corrupt tax administration a rise in tax rate sets off complicated strategic moves by both taxpayers and administrators. It is shown that in some circumstances, this may bring about Laffer like behavior of overall tax revenue, i.e. a higher tax rate results in smaller net revenue for the government. Further, a more intense tax effort by increasing the number of returns audited may also reduce net revenues. Finally if tax and fine rates positively influence the level of corruption in the administration, these outcomes become more likely. Copyright 2000 by Kluwer Academic Publishers

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Publisher Info
Article provided by Springer in its journal Public Choice.

Volume (Year): 105 (2000)
Issue (Month): 1-2 (October)
Pages: 61-78
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Handle: RePEc:kap:pubcho:v:105:y:2000:i:1-2:p:61-78

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Galeotti, Gianluigi & Merlo, Antonio, 1994. "Political Collusion and Corruption in a Representative Democracy," Public Finance = Finances publiques, , vol. 49(Supplemen), pages 232-43.
  2. Basu, Kaushik & Bhattacharya, Sudipto & Mishra, Ajit, 1992. "Notes on bribery and the control of corruption," Journal of Public Economics, Elsevier, vol. 48(3), pages 349-359, August. [Downloadable!] (restricted)
  3. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September. [Downloadable!] (restricted)
  4. Graetz, Michael J & Reinganum, Jennifer F & Wilde, Louis L, 1986. "The Tax Compliance Game: Toward an Interactive Theory of Law Enforcement," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(1), pages 1-32, Spring.
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  5. Herbert Dawid & Gustav Feichtinger, 1996. "On the persistence of corruption," Journal of Economics, Springer, vol. 64(2), pages 177-193, June. [Downloadable!] (restricted)
  6. Mookherjee, Dilip & Png, I P L, 1995. "Corruptible Law Enforcers: How Should They Be Compensated?," Economic Journal, Royal Economic Society, vol. 105(428), pages 145-59, January. [Downloadable!] (restricted)
  7. Lui, Francis T., 1986. "A dynamic model of corruption deterrence," Journal of Public Economics, Elsevier, vol. 31(2), pages 215-236, November. [Downloadable!] (restricted)
  8. Steven N. S. Cheung, 1996. "A Simplistic General Equilibrium Theory Of Corruption," Contemporary Economic Policy, Western Economic Association International, vol. 14(3), pages 1-5, 07. [Downloadable!] (restricted)
  9. Ira N. Gang & Arindam Das-Gupta, 1998. "Decomposing Revenue Effects of Tax Evasion, Base Broadening and Tax Rate Reduction," Departmental Working Papers 199506, Rutgers University, Department of Economics. [Downloadable!]
  10. Bac, Mehmet, 1996. "Corruption, Supervision, and the Structure of Hierarchies," Journal of Law, Economics and Organization, Oxford University Press, vol. 12(2), pages 277-98, October.
  11. Banerjee, A.V., 1997. "A Theory of Misgovernance," Working papers 97-4, Massachusetts Institute of Technology (MIT), Department of Economics.
  12. Jong-Il Kim & Lawrence J. Lau, 1996. "The sources of Asian Pacific economic growth," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 448-54, April. [Downloadable!] (restricted)
  13. Thompson, Velma Montoya & Thompson, Earl A, 1993. " Achieving Optimal Fines for Political Bribery: A Suggested Political Reform," Public Choice, Springer, vol. 77(4), pages 773-91, December.
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  15. Feichtinger, Gustav & Wirl, Franz, 1994. "On the stability and potential cyclicity of corruption in governments subject to popularity constraints," Mathematical Social Sciences, Elsevier, vol. 28(2), pages 113-131, October. [Downloadable!] (restricted)
  16. Manion, Melanie, 1996. "Corruption by Design: Bribery in Chinese Enterprise Licensing," Journal of Law, Economics and Organization, Oxford University Press, vol. 12(1), pages 167-95, April.
  17. Bliss, Christopher & Di Tella, Rafael, 1997. "Does Competition Kill Corruption?," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 1001-23, October.
  18. Francis T. Lui, 1996. "Three Aspects Of Corruption," Contemporary Economic Policy, Western Economic Association International, vol. 14(3), pages 26-29, 07. [Downloadable!] (restricted)
  19. Minford, Patrick & Ashton, Paul, 1991. "The Poverty Trap and the Laffer Curve--What Can the GHS Tell Us?," Oxford Economic Papers, Oxford University Press, vol. 43(2), pages 245-79, April. [Downloadable!] (restricted)
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  20. Bowles, Roger & Garoupa, Nuno, 1997. "Casual police corruption and the economics of crime," International Review of Law and Economics, Elsevier, vol. 17(1), pages 75-87, March. [Downloadable!] (restricted)
  21. Gordon Tullock, 1996. "Corruption Theory And Practice," Contemporary Economic Policy, Western Economic Association International, vol. 14(3), pages 6-13, 07. [Downloadable!] (restricted)
  22. Banerjee, Abhijit V, 1997. "A Theory of Misgovernance," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1289-1332, November.
  23. Bac, Mehmet, 1996. "Corruption and Supervision Costs in Hierarchies," Journal of Comparative Economics, Elsevier, vol. 22(2), pages 99-118, April. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Francesco Busato & Bruno Chiarini, 2009. "Steady state Laffer curve with the underground economy," Discussion Papers 2_2009, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy. [Downloadable!]
  2. Epstein, Gil S. & Gang, Ira N., 2009. "Why Pay Taxes When No One Else Does?," IZA Discussion Papers 4153, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Antonio Acconcia & Marcello D'Amato & Riccardo Martina, 2003. "Corruption and Tax Evasion with Competitive Bribes," CSEF Working Papers 112, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
  4. Laszlo Goerke, 2006. "Bureaucratic Corruption and Profit Tax Evasion," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  5. Antonio Acconcia & Marcello D'Amato & Riccardo Martina, 2003. "Tax Evasion and Corruption in Tax Administration," Public Economics 0310001, EconWPA. [Downloadable!]
  6. Antonio Acconcia, 2006. "Endogenous Corruption and Tax Evasion in a Dynamic Model," CSEF Working Papers 154, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Nov 2006. [Downloadable!]
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