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Growth Effects of VAT Evasion and Enforcement

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  • Chandler McClellan

Abstract

Lower tax revenues have a theoretically mixed effect on growth as they create more disposable income for investment but simultaneously reduce funds for public goods. This study combines firm-level data on tax evasion and enforcement from seventy-nine countries with macroeconomic data to examine the effects of tax enforcement measures and tax revenue shortfall on economic growth. This study finds that while increased enforcement measures reduce growth, high tax revenue collection serves to increase growth. These results suggest that reforms focusing on increasing revenue without resorting to greater enforcement measures are desirable.

Suggested Citation

  • Chandler McClellan, 2019. "Growth Effects of VAT Evasion and Enforcement," Public Finance Review, , vol. 47(3), pages 530-557, May.
    • Handle: RePEc:sae:pubfin:v:47:y:2019:i:3:p:530-557
    DOI: 10.1177/1091142118783475
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    References listed on IDEAS

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    Cited by:

    1. Andrew Feltenstein & Jorge Martinez-Vazquez & Biplab Datta & Sohani Fatehin, 2022. "A general equilibrium model of Value Added Tax evasion: an application to Pakistan," International Economics and Economic Policy, Springer, vol. 19(3), pages 537-556, July.
    2. Kateřina Krzikallová & Filip Tošenovský, 2020. "Is the Value Added Tax System Sustainable? The Case of the Czech and Slovak Republics," Sustainability, MDPI, vol. 12(12), pages 1-24, June.

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