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

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Author Info
Ratbek Dzhumashev ()
Emin Gahramanov

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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.

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Publisher 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.

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Length: 18
Date of creation: 15 Apr 2009
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Handle: RePEc:dkn:econwp:eco_2009_05

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Related research
Keywords: Tax evasion; Economic growth; Public services;

Find related papers by JEL classification:
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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