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Stricter Enforcement May Increase Tax Evasion

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  • Rainald Borck

Abstract

This paper shows that stricter enforcement may increase tax evasion. Individuals vote on a linear income tax which is used to finance lump sum transfers. Stricter enforcement may make redistributive taxation more attractive to the decisive voter. The tax rate and transfer may rise which in turn may increase tax evasion. An example shows that this result can actually occur. The paper also discusses the interaction between voting on taxes and the choice of audit rate by a budget maximizing bureaucrat.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.38639.de/dp297.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 297.

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Length: 16 p.
Date of creation: 2002
Date of revision:
Handle: RePEc:diw:diwwpp:dp297

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Keywords: Tax evasion; enforcement; voting;

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References

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  1. repec:att:wimass:9610 is not listed on IDEAS
  2. Feld, Lars P & Tyran, Jean-Robert, 2002. "Tax Evasion and Voting: An Experimental Analysis," Kyklos, Wiley Blackwell, vol. 55(2), pages 197-222.
  3. Cowell, Frank A., 1985. "Tax evasion with labour income," Journal of Public Economics, Elsevier, vol. 26(1), pages 19-34, February.
  4. Slemrod, Joel & Yitzhaki, Shlomo, 2002. "Tax avoidance, evasion, and administration," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 22, pages 1423-1470 Elsevier.
  5. Gans, Joshua S. & Smart, Michael, 1996. "Majority voting with single-crossing preferences," Journal of Public Economics, Elsevier, vol. 59(2), pages 219-237, February.
  6. Sanchez, Isabel & Sobel, Joel, 1993. "Hierarchical design and enforcement of income tax policies," Journal of Public Economics, Elsevier, vol. 50(3), pages 345-369, March.
  7. Roine, Jesper, 2003. "Voting over tax schedules in the presence of tax avoidance," Working Paper Series in Economics and Finance 529, Stockholm School of Economics.
  8. 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.
  9. Myles, Gareth D. & Naylor, Robin A., 1996. "A model of tax evasion with group conformity and social customs," European Journal of Political Economy, Elsevier, vol. 12(1), pages 49-66, April.
  10. John Douglas Wilson & Roger H. Gordon, 2003. "Expenditure Competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 399-417, 04.
  11. Cowell,Frank & Gordon,James, 1987. "Unwillingness to pay: Tax evasion and public good provision," Discussion Paper Serie A 142, University of Bonn, Germany.
  12. Andreoni, J. & Erard, B. & Feinstein, J., 1996. "Tax Compliance," Working papers 9610r, Wisconsin Madison - Social Systems.
  13. Alm, James & Sanchez, Isabel & de Juan, Ana, 1995. "Economic and Noneconomic Factors in Tax Compliance," Kyklos, Wiley Blackwell, vol. 48(1), pages 3-18.
  14. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
  15. Yitzhaki, Shlomo, 1974. "Income tax evasion: A theoretical analysis," Journal of Public Economics, Elsevier, vol. 3(2), pages 201-202, May.
  16. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
  17. Rainald Borck, 2009. "Voting on redistribution with tax evasion," Social Choice and Welfare, Springer, vol. 32(3), pages 439-454, March.
  18. Orviska, Marta & Hudson, John, 2003. "Tax evasion, civic duty and the law abiding citizen," European Journal of Political Economy, Elsevier, vol. 19(1), pages 83-102, March.
  19. Falkinger, Josef, 1991. "On optimal public good provision with tax evasion," Journal of Public Economics, Elsevier, vol. 45(1), pages 127-133, June.
  20. Roger H. Gordon & John D. Wilson, 1999. "Tax Structure and Government Behavior: Implications for Tax Policy," NBER Working Papers 7244, National Bureau of Economic Research, Inc.
  21. Romer, Thomas, 1975. "Individual welfare, majority voting, and the properties of a linear income tax," Journal of Public Economics, Elsevier, vol. 4(2), pages 163-185, February.
  22. Roine, Jesper, 1999. "Tax Avoidance, Redistribution and Voting," Research Papers in Economics 2000:1, Stockholm University, Department of Economics.
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Citations

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Cited by:
  1. Rainald Borck, 2003. "Voting on Redistribution with Tax Evasion," Discussion Papers of DIW Berlin 329, DIW Berlin, German Institute for Economic Research.
  2. Lago-Peñas, Ignacio & Lago-Peñas, Santiago, 2010. "The determinants of tax morale in comparative perspective: Evidence from European countries," European Journal of Political Economy, Elsevier, vol. 26(4), pages 441-453, December.
  3. Traxler, Christian, 2010. "Social norms and conditional cooperative taxpayers," European Journal of Political Economy, Elsevier, vol. 26(1), pages 89-103, March.
  4. Bethencourt, Carlos & Kunze, Lars, 2013. "The political economics of redistribution, inequality and tax avoidance," MPRA Paper 51127, University Library of Munich, Germany.
  5. Rainald Borck, 2004. "Income Tax Evasion and the Penalty Structure," Economics Bulletin, AccessEcon, vol. 8(5), pages 1-9.
  6. Simonovits, András, 2010. "Adómorál és adórendszer
    [Tax morality and progressive wage tax]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 481-496.
  7. Besfamille, Martin & De Donder, Philippe & Lozachmeur, Jean-Marie, 2009. "The Political Economy of the (Weak) Enforcement of Sales Tax," CEPR Discussion Papers 7108, C.E.P.R. Discussion Papers.
  8. Weinreich, Daniel, 2013. "Fair tax evasion and majority voting over redistributive taxation," MPRA Paper 48919, University Library of Munich, Germany.
  9. Alejandro Esteller-More, 2004. "Tax Evasion in Interrelated Taxes," Public Economics 0401001, EconWPA.
  10. repec:ebl:ecbull:v:8:y:2004:i:5:p:1-9 is not listed on IDEAS

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