Evasion and Time Consistency in the Taxation of Capital Income
AbstractEvasion and time inconsistency have been prominent concerns in recent discussions capital income taxation, both theoretical and applied. This paper establishes a link between them, suggesting a potentially useful role for evasion additional to those previously identified: by committing to relatively tax enforcement, the government may be able to alleviate the welfare loss implied by its inability to commit to the tax rate. The scope for this role proves strikingly wide: it is optimal for the government to facilitate the evasion of the capital income taxes that it chooses to impose whenever the time consistent tax rate exceeds that which would be optimal if the government could commit to it.
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Bibliographic InfoPaper provided by Queen's University, Department of Economics in its series Working Papers with number 890.
Length: 24 pages
Date of creation: Oct 1993
Date of revision:
Other versions of this item:
- Boadway, Robin & Keen, Michael, 1998. "Evasion and Time Consistency in the Taxation of Capital Income," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 461-76, May.
- Robin Boadway & Michael Keen, 1993. "Evasion and time consistency in the taxation of capital income," IFS Working Papers W93/20, Institute for Fiscal Studies.
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
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