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Tax Evasion in a Unionised Economy

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  • Goerke, Laszlo

    ()
    (IAAEU, University of Trier)

Abstract

In a unionised labour market, a substitution of a payroll for an income tax will not alter employment if tax obligations are fulfilled. However, if workers or firms can evade taxes this irrelevance result might no longer apply. This will especially be the case if the fine for tax evasion depends on undeclared income or on wage payments or if withholding regulations prevent optimal evasion choices. In such instances, tax evasion opportunities make the legal incidence of taxes an important determinant of their economic incidence and employment can rise with a substitution of an income for a payroll tax.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 382.

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Length: 18 pages
Date of creation: Oct 2001
Date of revision:
Handle: RePEc:iza:izadps:dp382

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Keywords: Economic incidence; legal incidence; penalty; tax evasion; trade union;

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References

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  1. Marrelli, M. & Martina, R., 1988. "Tax evasion and strategic behaviour of the firms," Journal of Public Economics, Elsevier, vol. 37(1), pages 55-69, October.
  2. Koskela, E. & Schob, R., 1998. "Does the Composition of Wage and Payroll Taxes Matter Under Nash Bargaining," University of Helsinki, Department of Economics 443, Department of Economics.
  3. Blinder, Alan S, 1988. "The Challenge of High Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 1-15, May.
  4. Andreoni, J. & Erard, B. & Feinstein, J., 1996. "Tax Compliance," Working papers 9610r, Wisconsin Madison - Social Systems.
  5. Paolo M. Panteghini, 2000. "Tax Evasion and Entrepreneurial Flexibility," Public Finance Review, , vol. 28(3), pages 199-209, May.
  6. Picard, P.M. & Toulemonde, E., 1999. "On the Equivalence of Taxes Paid by Employers and Employees," Papers 215, Notre-Dame de la Paix, Sciences Economiques et Sociales.
  7. Gideon Yaniv, 1996. "Tax Evasion and Monopoly Output Decisions: Note," Public Finance Review, , vol. 24(4), pages 501-505, October.
  8. Wang, Leonard F.S. & Conant, John L., 1988. "Corporate Tax Evasion and Output Decisions of the Uncertain Monopolist," National Tax Journal, National Tax Association, vol. 41(4), pages 579-81, December.
  9. Lai, Ching-Chong & Chang, Juin-Jen & Chang, Wen-Ya, 1995. "Tax Evasion and Efficient Bargains," Public Finance = Finances publiques, , vol. 50(1), pages 96-105.
  10. Lockwood, Ben & Manning, Alan, 1993. "Wage setting and the tax system theory and evidence for the United Kingdom," Journal of Public Economics, Elsevier, vol. 52(1), pages 1-29, August.
  11. Yitzhaki, Shlomo, 1974. "Income tax evasion: A theoretical analysis," Journal of Public Economics, Elsevier, vol. 3(2), pages 201-202, May.
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Cited by:
  1. Tomas Kögel, 2005. "On Substituting Consumption Taxes for Unemployment Insurance Contributions to Reduce Unemployment," Discussion Paper Series 2005_11, Department of Economics, Loughborough University, revised Sep 2005.
  2. Marek Gora & Artur Radziwill & Agnieszka Sowa & Mateusz Walewski, 2006. "Tax Wedge and Skills: Case of Poland in International Perspective," CASE Network Reports 0064, CASE-Center for Social and Economic Research.

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