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

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  • 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.

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File URL: http://www.deakin.edu.au/buslaw/aef/workingpapers/papers/2009_5.pdf
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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.

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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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Keywords: Tax evasion; Economic growth; Public services;

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