Human Capital Formation and Tax Evasion
AbstractA strictly risk-averse individual with an exogenous gross income in period one can acquire human capital in the same period and evade taxes. Period-two income rises with educational investments in period one and can also be hidden from tax authorities. It is shown that a greater tax deductibility of educational investments and higher individual ability induce a positive correlation between tax evasion and educational investments in period two, whereas the relationship in period one is ambiguous. These theoretical predictions can explain diverse empirical findings on the correlation between education and tax evasion.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3719.
Date of creation: 2012
Date of revision:
human capital; income tax; tax evasion;
Other versions of this item:
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- I20 - Health, Education, and Welfare - - Education - - - General
This paper has been announced in the following NEP Reports:
- NEP-ACC-2012-12-15 (Accounting & Auditing)
- NEP-ALL-2012-12-15 (All new papers)
- NEP-HRM-2012-12-15 (Human Capital & Human Resource Management)
- NEP-IUE-2012-12-15 (Informal & Underground Economics)
- NEP-PBE-2012-12-15 (Public Economics)
- NEP-PUB-2012-12-15 (Public Finance)
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