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Unemployment, tax evasion and the "slippery slope" framework

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  • Lisi, Gaetano

Abstract

The proposed theoretical work introduces the basic insights of the ‘slippery slope’ framework into the benchmark macroeconomic model of the labour market in order to study the relation between tax compliance (both voluntary and enforced), tax evasion and unemployment. This paper shows that the firm's decision to evade taxes also depends on trust in tax authorities, and affects one of the most important macroeconomic variables: the unemployment rate. Also, the model is able to mimic the crucial interaction between trust and power and its effects on voluntary and enforced compliance. The main result is that with the “right mix” of policy tools of deterrence, trust in tax authorities is maximised, (voluntary) tax compliance increases and a reduction of tax evasion may decrease unemployment.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 37433.

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Date of creation: 18 Mar 2012
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Handle: RePEc:pra:mprapa:37433

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Keywords: tax evasion; tax compliance; trust and power; unemployment;

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  1. Kirchler,Erich, 2007. "The Economic Psychology of Tax Behaviour," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521876742.
  2. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  3. Sandmo, Agnar, 2005. "The Theory of Tax Evasion: A Retrospective View," National Tax Journal, National Tax Association, vol. 58(4), pages 643-63, December.
  4. Stephan Muehlbacher & Erich Kirchler, 2010. "Tax Compliance by Trust and Power of Authorities," International Economic Journal, Taylor & Francis Journals, Taylor & Francis Journals, vol. 24(4), pages 607-610.
  5. Barbara Petrongolo & Christopher A. Pissarides, 2000. "Looking Into the Black Box: A Survey of the Matching Function," CEP Discussion Papers dp0470, Centre for Economic Performance, LSE.
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Cited by:
  1. Gaetano Lisi, 2012. "Macroeconomic implications of the dynamics between power and trust: a theoretical formalisation of the ‘slippery slope’ framework," Discussion Papers in Economic Behaviour 1012, University of Valencia, ERI-CES.
  2. Gaetano Lisi, 2013. "Tax Morale, Tax Compliance and the Optimal Tax Policy," Discussion Papers in Economic Behaviour 0313, University of Valencia, ERI-CES.

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