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Self-Employment Income Gap in Great Britain: How Much and Who?

Author

Listed:
  • Ana Cinta G Cabral
  • Christos Kotsogiannis
  • Gareth Myles

Abstract

This article utilizes an expenditure survey-based data set that is rich in terms of observable characteristics to estimate the ‘income gap’ (defined to be one minus the proportion of reported to true income) of the self-employed in Great Britain. It also estimates the evasion response of the individual characteristics of the self-employed. It emerges that self-employed report, on average, around 80.4% of their income to the tax authority, which translates into an income-gap of 19.6% which varies significantly by sex, age, and region. In particular, male self-employed taxpayers under-report more than female ones, and they, in general, become more compliant as they age. Particular emphasis is paid to verifying that the income gap observed cannot be explained by other reasons than under-reporting. (JEL codes: H26, O17, D12, E26)

Suggested Citation

  • Ana Cinta G Cabral & Christos Kotsogiannis & Gareth Myles, 2019. "Self-Employment Income Gap in Great Britain: How Much and Who?," CESifo Economic Studies, CESifo Group, vol. 65(1), pages 84-107.
    • Handle: RePEc:oup:cesifo:v:65:y:2019:i:1:p:84-107.
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    File URL: http://hdl.handle.net/10.1093/cesifo/ify015
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    Cited by:

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    2. Figari, Francesco & Bazzoli, Martina & Di Caro, Paolo & V. Fiorio, Carlo & Manzo, Marco, 2020. "Size, heterogeneity and distributional effects of self-employment income tax evasion in Italy," EUROMOD Working Papers EM18/20, EUROMOD at the Institute for Social and Economic Research.
    3. Alessandro Di Nola & Georgi Kocharkov & Almuth Scholl & Anna-Mariia Tkhir, 2021. "The Aggregate Consequences of Tax Evasion," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 40, pages 198-227, April.
    4. Niizeki, Takeshi & Hamaaki, Junya, 2023. "Do the self-employed underreport their income? Evidence from Japanese panel data," Journal of the Japanese and International Economies, Elsevier, vol. 67(C).
    5. Merike Kukk & Alari Paulus & Karsten Staehr, 2020. "Cheating in Europe: underreporting of self-employment income in comparative perspective," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(2), pages 363-390, April.

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    More about this item

    Keywords

    income-gap; tax compliance; tax evasion; shadow economy; self-employed;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy

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