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The Distributional Component of the Price of the Tax Avoidance Service


Author Info

  • Damjanovic, Tatiana

    (Dept. of Economics, Stockholm School of Economics)


The traditional avoidance literature undeservedly neglects tax base distribution as a factor affecting the avoidance price, and generally assumed to be equal to the avoidance cost. In reality, avoidance providers are usually either high-skilled specialists or insiders. The strong collusion thus, naturally seems to be an assumption of the behavior of avoidance providers. Within such a framework, income distribution, which forms an avoidance demand together with tax codes, plays a very essential roll for the outcome of both avoidance price and quantity. My article models an economy with a monopolistic avoidance provider and imperfect information, and illustrates possible consequences of tax base changes. The paper examines the relationship between inequality and a government's ability to collect tax revenue, and also considers the possible outcome of a tax base broadening. Furthermore, it provides an additional explanation for the secession decision.

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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 0454.

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Length: 40 pages
Date of creation: 05 Jul 2001
Date of revision: 03 Dec 2001
Handle: RePEc:hhs:hastef:0454

Contact details of provider:
Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Phone: +46-(0)8-736 90 00
Fax: +46-(0)8-31 01 57
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Related research

Keywords: Tax avoidance; optimal taxation; income distribution; endogenous prices; inequality; tax base broadening; secession.;

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Cited by:
  1. Tatiana Damjanovic, 2005. "Does More Progressive Tax Make Tax Discipline Weaker?," CRIEFF Discussion Papers 0506, Centre for Research into Industry, Enterprise, Finance and the Firm.
  2. Tatiana Damjanovic & David Ulph, 2009. "Tax Progressivity, Income Distribution and Tax Non-Compliance," Working Papers 0928, Oxford University Centre for Business Taxation.


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