Taxing Hard-to-Tax Markets
AbstractTax enforcement costs constrain the government?s ability to observe economic transactions, giving rise to hard-to-tax (HTT) markets. In these markets transactions are untaxed and consumers are better off than in taxed markets. This paper studies a novel approach to combat evasion in HTT markets: consumer auditing, which rewards consumers for requesting transaction receipts. We develop a Hotelling-type spatial model of sales taxation to analyze the welfare and distributional effects of the implementation of this policy. We find that consumer auditing allows for a lower tax rate and greater provision of the public good in the economy. We show that this policy not only can enhance welfare, but also equalize utilities of consumers across markets.
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Bibliographic InfoPaper provided by University of Windsor, Department of Economics in its series Working Papers with number 1305.
Length: 18 pages
Date of creation: Aug 2013
Date of revision:
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More information through EDIRC
taxation; hard-to-tax; tax evasion.;
Find related papers by JEL classification:
- H1 - Public Economics - - Structure and Scope of Government
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
This paper has been announced in the following NEP Reports:
- NEP-ACC-2013-08-05 (Accounting & Auditing)
- NEP-ALL-2013-08-05 (All new papers)
- NEP-IUE-2013-08-05 (Informal & Underground Economics)
- NEP-PBE-2013-08-05 (Public Economics)
- NEP-PUB-2013-08-05 (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.:
- Carla Marchese, 2009.
"Rewarding the Consumer for Curbing the Evasion of Commodity Taxes?,"
FinanzArchiv: Public Finance Analysis,
Mohr Siebeck, Tübingen, vol. 65(4), pages 383-402, December.
- Marchese, Carla, 2006. "Rewarding the consumer for curbing the evasion of commodity taxes?," POLIS Working Papers 72, Institute of Public Policy and Public Choice - POLIS.
- Robin Boadway & Nicolas Marceau & Steeve Mongrain, 2007.
"Redistributive Taxation under Ethical Behaviour,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 109(3), pages 505-529, 09.
- Juin-jen Chang & Ching-chong Lai, 2004. "Collaborative tax evasion and social norms: why deterrence does not work," Oxford Economic Papers, Oxford University Press, vol. 56(2), pages 344-368, April.
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