The Underground Economy: Minimizing the Size of Government
AbstractIn this paper we outline the results of some extensive econometric modelling that has been undertaken to establish a time-series of the size of the New Zealand Hidden Economy from 1968 to 1994. The derivation of these data has facilitated a good deal of associated research, and here we draw on those findings to comment, in particular, on the relationship between taxation policy and the effects taxes - in terms of both the overall tax burden and also the nature of the "tax mix", as between direct and indirect taxes, etc.. Our research in this area has revealed a clear and statistically significant link between high taxes and the size of the underground economy. Moreover, we have been able to establish the extent to which reductions in the tax burden, and changes to its "mix", can lower illicit activity in the economy. Interestingly, and very importantly, this in turn enables us to establish an "optimal" aggregate tax rate, if the objective is maximize the impact on the Hidden Economy. Many of the broad lessons that emerge from this research have applicability in the Canadian context, and more specific work of this type with Canadian data is currently being undertaken by the author and colleagues.
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Bibliographic InfoPaper provided by Department of Economics, University of Victoria in its series Department Discussion Papers with number 9801.
Length: 18 pages
Date of creation: 31 Mar 1998
Date of revision:
Publication status: Forthcoming in H. Grubel (ed.), "How to Spend the Fiscal Dividend: What is the Optimal Size of Government?" (Fraser Institute, Vancouver, B.C., 1998).
Note: This is a revised version of a presentation to the Fraser Institute Conference on "How to Spend the Fiscal Dividend", Ottawa, Ontario, December 1997
Contact details of provider:
Postal: PO Box 1700, STN CSC, Victoria, BC, Canada, V8W 2Y2
Web page: http://web.uvic.ca/econ
More information through EDIRC
Hidden Economy; Underground Economy; Tax Evasion; Tax Gap;
Other versions of this item:
- David E. A. Giles, 1998. "The Underground Economy: Minimizing the Size of Government," Econometrics Working Papers 9808, Department of Economics, University of Victoria.
- David E.A. Giles, 1998. "The Underground Economy: Minimizing the Size of Government," Econometrics Working Papers 9801, Department of Economics, University of Victoria.
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
- H1 - Public Economics - - Structure and Scope of Government
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
This paper has been announced in the following NEP Reports:
- NEP-ALL-1998-10-19 (All new papers)
- NEP-CDM-1998-08-31 (Collective Decision-Making)
- NEP-EEC-1998-10-19 (European Economics)
- NEP-PBE-1998-10-19 (Public Economics)
- NEP-POL-1998-08-31 (Positive Political Economics)
- NEP-PUB-1998-08-31 (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.:
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