Tax Evasion as a Disciplinary Mechanism for Fiscal Policy
AbstractThe paper provides a theory where the size of the inspection authority and the size of the fines evolve endogenously. We find that if a society cannot commit to future taxes it may gain form committing to a small Inland Revenue Service and small punishments for tax evasion. The possibility of the public evading taxes limits the effectiveness of capital taxation. By setting detection probabilities and punishment relatively low, the government indirectly commits itself not to tax capital income too heavily in the future.
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Bibliographic InfoPaper provided by Department of Economics, University of Birmingham in its series Discussion Papers with number 97-27.
Length: 25 pages
Date of creation: 1997
Date of revision:
TAX EVASION ; FISCAL POLICY ; TAXATION ; INCOME REDISTRIBUTION;
Find related papers by JEL classification:
- D30 - Microeconomics - - Distribution - - - General
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
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