Advanced Search
MyIDEAS: Login to save this paper or follow this series

A Stochastic Growth Model with Income Tax Evasion: Implications for Australia

Contents:

Author Info

  • Ratbek Dzhumashev

    ()

  • Emin Gahramanov

Abstract

In this paper we develop a stochastic endogenous growth model augmented with income tax evasion. Our model avoids some existing discrepancies between empirical evidence and theoretical predictions of traditional tax evasion models. Further, we show that: i) productive government expenditures play an important role in affecting economy's tax evasion rate; ii) the average marginal income tax rate in Australia come close to the optimal; and iii) the phenomenon of tax evasion is not an excuse for a productive government to advocate an excessive income taxation.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.deakin.edu.au/buslaw/aef/workingpapers/papers/2009_5.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Economics Series with number 2009_05.

as in new window
Length: 18
Date of creation: 15 Apr 2009
Date of revision:
Handle: RePEc:dkn:econwp:eco_2009_05

Contact details of provider:
Postal: 221 Burwood Highway, Burwood 3125
Phone: 61 3 9244 3815
Web page: http://www.deakin.edu.au/buslaw/aef/index.php

Related research

Keywords: Tax evasion; Economic growth; Public services;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Bernard Fortin & Guy Lacroix & Marie-Claire Villeval, 2007. "Tax Evasion and Social Interactions," Post-Print, HAL halshs-00238448, HAL.
  2. Ralph C Bayer & Matthias Sutter, 2004. "The excess burden of tax evasion - An experimental detection- concealment contest," Experimental, EconWPA 0412003, EconWPA.
  3. Barro, R.J., 1988. "Government Spending In A Simple Model Of Endogenous Growth," RCER Working Papers, University of Rochester - Center for Economic Research (RCER) 130, University of Rochester - Center for Economic Research (RCER).
  4. Jung, Young H. & Snow, Arthur & Trandel, Gregory A., 1994. "Tax evasion and the size of the underground economy," Journal of Public Economics, Elsevier, Elsevier, vol. 54(3), pages 391-402, July.
  5. Mar�A Jes�S Freire-Ser�N & Judith Panad�S, 2008. "Does Tax Evasion Modify the Redistributive Effect of Tax Progressivity?," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 84(267), pages 486-495, December.
  6. Dan Usher, 1986. "Tax Evasion and the Marginal Cost of Public Funds," Working Papers, Queen's University, Department of Economics 637, Queen's University, Department of Economics.
  7. Lau, Sau-Him Paul & Sin, Chor-Yiu, 1997. "Public Infrastructure and Economic Growth: Time-Series Properties and Evidence," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 73(221), pages 125-35, June.
  8. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, Elsevier, vol. 1(3-4), pages 323-338, November.
  9. Alm, James & Bahl, Roy & Murray, Matthew N., 1993. "Audit selection and income tax underreporting in the tax compliance game," Journal of Development Economics, Elsevier, Elsevier, vol. 42(1), pages 1-33, October.
  10. Christophe Kamps, 2005. "The Dynamic Effects of Public Capital: VAR Evidence for 22 OECD Countries," International Tax and Public Finance, Springer, Springer, vol. 12(4), pages 533-558, August.
  11. Bajada, Christopher, 1999. "Estimates of the Underground Economy in Australia," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 75(231), pages 369-84, December.
  12. de la Grandville,Olivier, 2009. "Economic Growth," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521898010.
  13. de la Grandville,Olivier, 2009. "Economic Growth," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521725200.
  14. Louis Kaplow, 1989. "Optimal Taxation with Costly Enforcement and Evasion," NBER Working Papers 2996, National Bureau of Economic Research, Inc.
  15. Creedy, John, 1997. "Taxation in General Equilibrium: An Introduction," Bulletin of Economic Research, Wiley Blackwell, Wiley Blackwell, vol. 49(3), pages 177-203, July.
  16. Gali, Jordi, 1994. "Government size and macroeconomic stability," European Economic Review, Elsevier, Elsevier, vol. 38(1), pages 117-132, January.
  17. Geeroms, Hans J A & Wilmots, Hendrik, 1985. "An Empirical Model of Tax Evasion and Tax Avoidance," Public Finance = Finances publiques, , , vol. 40(2), pages 190-209.
  18. Dhami, Sanjit & al-Nowaihi, Ali, 2007. "Why do people pay taxes? Prospect theory versus expected utility theory," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 64(1), pages 171-192, September.
  19. Sturm, Jan Egbert & de Haan, Jakob, 1995. "Is public expenditure really productive?: New evidence for the USA and The Netherlands," Economic Modelling, Elsevier, Elsevier, vol. 12(1), pages 60-72, January.
  20. Andreoni, J. & Erard, B. & Feinstein, J., 1996. "Tax Compliance," Working papers, Wisconsin Madison - Social Systems 9610r, Wisconsin Madison - Social Systems.
  21. Otta, G.D. & Voss, G.M., 1996. "Is Public capital Provision Efficient?," Papers, New South Wales - School of Economics 96/10, New South Wales - School of Economics.
  22. Cowell, F A, 1990. "Tax Sheltering and the Cost of Evasion," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 231-43, January.
  23. Alicia H. Munnell, 1990. "Why has productivity growth declined? Productivity and public investment," New England Economic Review, Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, issue Jan, pages 3-22.
  24. Patrick J. Caragata, & David E. A. Giles, 1998. "Simulating the Relationship Between the Hidden Economy and the Tax Level and Tax Mix in New Zealand," Econometrics Working Papers, Department of Economics, University of Victoria 9804, Department of Economics, University of Victoria.
  25. Crane, Steven E. & Nourzad, Farrokh, 1990. "Tax Rates and Tax Evasion: Evidence from California Amnesty Data," National Tax Journal, National Tax Association, vol. 43(2), pages 189-99, June.
  26. Dan Usher, 1982. "The Private Cost of Public Funds: Variations on Themes by Browning, Atkinson and Stern," Working Papers, Queen's University, Department of Economics 481, Queen's University, Department of Economics.
  27. Groenewegen, Peter D, 1984. "Rationalizing Australian Taxation Revisited," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 60(169), pages 113-27, June.
  28. Cowell,Frank & Gordon,James, 1987. "Unwillingness to pay: Tax evasion and public good provision," Discussion Paper Serie A, University of Bonn, Germany 142, University of Bonn, Germany.
  29. Kesselman, Jonathan R, 1993. "Evasion Effects of Changing the Tax Mix," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 69(205), pages 131-48, June.
  30. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda, Federal Reserve Bank of Chicago 88-7, Federal Reserve Bank of Chicago.
  31. Rangan Gupta, 2005. "Endogenous Tax Evasion and Reserve Requirements: A Comparative Study in the Context of European Economies," Computing in Economics and Finance 2005, Society for Computational Economics 328, Society for Computational Economics.
  32. Christopher Bajada, 2003. "Business Cycle Properties of the Legitimate and Underground Economy in Australia," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 79(247), pages 397-411, December.
  33. John A. Tatom, 1991. "Public capital and private sector performance," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue May, pages 3-15.
  34. John Fernald, 1997. "Roads to prosperity? assessing the link between public capital and productivity," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 592, Board of Governors of the Federal Reserve System (U.S.).
  35. David E. A. Giles, 1999. "Modelling the hidden economy and the tax-gap in New Zealand," Empirical Economics, Springer, Springer, vol. 24(4), pages 621-640.
  36. Cremer, Helmuth & Gahvari, Firouz, 1994. " Tax Evasion, Concealment and the Optimal Linear Income Tax," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 96(2), pages 219-39.
  37. David Giles & Patrick Caragata, 2001. "The learning path of the hidden economy: the tax burden and tax evasion in New Zealand," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 33(14), pages 1857-1867.
  38. Glen Hepburn, 1992. "Estimates of Cash-Based Income Tax Evasion in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 25(2), pages 54-62.
  39. Trevor Breusch, 2005. "Australia's Cash Economy: Are the Estimates Credible?," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 81(255), pages 394-403, December.
  40. Baldry, J C, 1984. "The Enforcement of Income Tax Laws: Efficiency Implications," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 60(169), pages 156-59, June.
  41. Gideon Yaniv, 1999. "Tax Evasion, Risky Laundering, and Optimal Deterrence Policy," International Tax and Public Finance, Springer, Springer, vol. 6(1), pages 27-38, February.
  42. Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-73, August.
  43. Kesselman, Jonathan R., 1989. "Income tax evasion : An intersectoral analysis," Journal of Public Economics, Elsevier, Elsevier, vol. 38(2), pages 137-182, March.
  44. Kolm, Serge-Christophe, 1973. "A note on optimum tax evasion," Journal of Public Economics, Elsevier, Elsevier, vol. 2(3), pages 265-270, July.
  45. Otto, Glenn & Voss, Graham M, 1994. "Public Capital and Private Sector Productivity," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 70(209), pages 121-32, June.
  46. Been-Lon Chen, 2003. "Tax Evasion in a Model of Endogenous Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(2), pages 381-403, April.
  47. Creedy, John & McDonald, Ian M, 1992. "Union Wage Responses to a Shift from Direct to Indirect Taxation," Bulletin of Economic Research, Wiley Blackwell, Wiley Blackwell, vol. 44(3), pages 221-32, July.
  48. Lin, Wen-Zhung & Yang, C. C., 2001. "A dynamic portfolio choice model of tax evasion: Comparative statics of tax rates and its implication for economic growth," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 25(11), pages 1827-1840, November.
  49. Timothy Kam & Yi-Chia Wang, 2008. "Public Capital Spillovers and Growth Revisited: A long-run and Dynamic Structural Analysis," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 84(266), pages 378-392, 09.
  50. Creedy, John & McDonald, Ian M, 1990. "A Tax Package to Reduce the Marginal Rate of Income Tax and the Wage Demands of Trade Unions," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 66(194), pages 195-202, September.
  51. Jordi Caballé & Judith Panadés, 2007. "Tax Rates, Tax Evasion, and Growth in a Multi-period Economy," Hacienda Pública Española, IEF, IEF, vol. 183(4), pages 67-80, december.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:dkn:econwp:eco_2009_05. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dr Xueli Tang).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.