Who participates in tax amnesties? Self-selection of risk-averse taxpayers
AbstractIn this paper we model taxpayer participation in an unanticipated tax amnesty which can be entered by paying a fixed amount. Taxpayers are characterized by a Constant Relative Risk Aversion (CRRA) utility function and differ in relative risk aversion coefficient and in income. With minor changes the same model also describes a FATOTA (Fixed Amount of Taxes or Tax Audit) system. Our results show that amnesties may fail as a self-selective device to fully separate large-scale from small-scale tax evaders and to extract resources from the former. Only taxpayers whose relative risk aversion falls within a given interval participate, while those whose evasion is too small or too large do not enter. The model is used to estimate relative risk aversion and tax evasion of participants in the 1991 and 1994 Italian income tax amnesties.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute of Public Policy and Public Choice - POLIS in its series POLIS Working Papers with number 21.
Length: 38 pages
Date of creation: Oct 2001
Date of revision:
Contact details of provider:
Web page: http://polis.unipmn.it
tax amnesty; tax evasion; relative risk aversion; self-selection;
Find related papers by JEL classification:
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-10-29 (All new papers)
- NEP-EEC-2001-10-29 (European Economics)
- NEP-LAW-2001-10-29 (Law & Economics)
- NEP-PBE-2001-10-29 (Public Economics)
- NEP-PUB-2001-10-29 (Public Finance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Luigi Guiso & Monica Paiella, 2008.
"Risk Aversion, Wealth, and Background Risk,"
Journal of the European Economic Association,
MIT Press, vol. 6(6), pages 1109-1150, December.
- Monica Paiella & Luigi Guiso, 2004. "Risk Aversion, Wealth and Background Risk," 2004 Meeting Papers 525, Society for Economic Dynamics.
- Guiso, Luigi & Paiella, Monica, 2001. "Risk Aversion, Wealth and Background Risk," CEPR Discussion Papers 2728, C.E.P.R. Discussion Papers.
- Luigi Guiso & Monica Paiella, 2003. "Risk Aversion, Wealth and Background Risk," Temi di discussione (Economic working papers) 483, Bank of Italy, Economic Research and International Relations Area.
- Luigi Guiso & Monica Paiella, 2007. "Risk Aversion, Wealth, and Background Risk," Economics Working Papers ECO2007/47, European University Institute.
- Marchese, Carla & Privileggi, Fabio, 1997.
"Taxpayers' Attitudes toward Risk and Amnesty Participation: Economic Analysis and Evidence for the Italian Case,"
Public Finance = Finances publiques,
, vol. 52(3-4), pages 394-410.
- Marchese, Carla & Privileggi, Fabio, 1999. "Taxpayers Attitudes Toward Risk and Amnesty Participation: Economic Analysis and Evidence for the Italian Case," POLIS Working Papers 6, Institute of Public Policy and Public Choice - POLIS.
- Mookherjee, Dilip & Png, Ivan, 1989. "Optimal Auditing, Insurance, and Redistribution," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 399-415, May.
- Pestieau, P. & Possen, U. M. & Slutsky, S. M., .
"The value of explicit randomization in the tax code,"
CORE Discussion Papers RP
-1300, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Pestieau, Pierre & Possen, Uri M. & Slutsky, Steven M., 1998. "The value of explicit randomization in the tax code," Journal of Public Economics, Elsevier, vol. 67(1), pages 87-103, January.
- Fisher, Ronald C. & Goddeeris, John H. & Young, James C., 1989. "Participation in Tax Amnesties: The Individual Income Tax," National Tax Journal, National Tax Association, vol. 42(1), pages 15-27, March Cit.
- Carla Marchese & Alberto Cassone, 2000. "Tax Amnesty as Price-Discriminating Behavior by a Monopolistic Government," European Journal of Law and Economics, Springer, vol. 9(1), pages 21-32, January.
- Grossman, Gene M & Katz, Michael L, 1983. "Plea Bargaining and Social Welfare," American Economic Review, American Economic Association, vol. 73(4), pages 749-57, September.
- Dagobert L. Brito & Jonathan H. Hamilton & Steven M. Slutsky & Joseph E. Stiglitz, 1995.
"Randomization in Optimal Income Tax Schedules,"
NBER Working Papers
3289, National Bureau of Economic Research, Inc.
- Franzoni, Luigi Alberto, 2000. "Amnesties, Settlements and Optimal Tax Enforcement," Economica, London School of Economics and Political Science, vol. 67(266), pages 153-76, May.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lucia Padovani).
If references are entirely missing, you can add them using this form.