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Can tax evasion tame Leviathan governments?

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  • Frode Brevik
  • Manfred Gärtner

    ()

Abstract

This paper looks at how income tax rates, consumption and public spending respond as venues for tax evasion open or close. The analysis draws on a 16-generation OLG model in which tax rates are determined in a repeated game between voters and a rent-seeking Leviathan government. Key insights are: (1) Effects on any generation alive when change takes place may differ substantially from steady state effects that accrue for generations yet to be born. (2) There is considerable intergenerational diversity in these effects that is not monotonous as we move from young to old. Combined, these results suggest that the political economy of pertinent institutional change may be quite complex.

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File URL: http://hdl.handle.net/10.1007/s11127-008-9284-z
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Bibliographic Info

Article provided by Springer in its journal Public Choice.

Volume (Year): 136 (2008)
Issue (Month): 1 (July)
Pages: 103-122

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Handle: RePEc:kap:pubcho:v:136:y:2008:i:1:p:103-122

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Web page: http://www.springerlink.com/link.asp?id=100332

Related research

Keywords: Leviathan government; Income tax; Tax evasion; Public spending; Rent seeking;

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  1. Bacchetta, Philippe & Espinosa, Maria Paz, 1995. "Information sharing and tax competition among governments," Journal of International Economics, Elsevier, vol. 39(1-2), pages 103-121, August.
  2. Harry Huizinga & Søren Bo Nielsen, . "Withholding Taxes or Information Exchange: The Taxation of International Interest Flows," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 00-19, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  3. Persson, Torsten & Roland , Gérard & Tabellini, Guido, 1997. "Comparative Politics and Public Finance," Seminar Papers, Stockholm University, Institute for International Economic Studies 633, Stockholm University, Institute for International Economic Studies.
  4. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
  5. Kollintzas, Tryphon & Philippopoulos, Apostolis & Vassilatos, Vanghelis, 2000. "Is Tax Policy Coordination Necessary?," CEPR Discussion Papers 2348, C.E.P.R. Discussion Papers.
  6. Fischer, Stanley, 1980. "Dynamic inconsistency, cooperation and the benevolent dissembling government," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 2(1), pages 93-107, May.
  7. Boadway, Robin & Keen, Michael, 1998. "Evasion and Time Consistency in the Taxation of Capital Income," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 461-76, May.
  8. Robert Barro, 1973. "The control of politicians: An economic model," Public Choice, Springer, Springer, vol. 14(1), pages 19-42, March.
  9. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, Springer, vol. 50(1), pages 5-25, January.
  10. repec:knz:cofedp:0307 is not listed on IDEAS
  11. Wolfgang Eggert & Martin Kolmar, 2004. "The Taxation of Financial Capital under Asymmetric Information and the Tax-competition Paradox," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(1), pages 83-106, 03.
  12. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
  13. Philippe Bacchetta & María Espinosa, 2000. "Exchange-of-Information Clauses in International Tax Treaties," International Tax and Public Finance, Springer, vol. 7(3), pages 275-293, May.
  14. Rogers, Carol Ann, 1987. "Expenditure taxes, income taxes, and time-inconsistency," Journal of Public Economics, Elsevier, vol. 32(2), pages 215-230, March.
  15. Jan Schnellenbach, 2006. "Tax Morale and the Taming of Leviathan," Constitutional Political Economy, Springer, vol. 17(2), pages 117-132, 06.
  16. V.V. Chari & Patrick J. Kehoe & Edward C. Prescott, 1988. "Time consistency and policy," Staff Report, Federal Reserve Bank of Minneapolis 115, Federal Reserve Bank of Minneapolis.
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