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Tax Amnesties in a Dynamic Model of Tax Evasion

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  • Macho-Stadler, Ines
  • Olivella, Pau
  • Perez-Castrillo, David

Abstract

We present a dynamic model of tax evasion, where tax liabilities last for two periods and the probability of an inspection decreases with the sum of taxes evaded this period plus taxes evaded last period. We show that a tax amnesty that pardons more than the evasion penalties (an extensive amnesty) can temporarily improve compliance. Whenever the inspection technology improves, steady state compliance also improves, but the economy takes time to transit from one steady state to the other. We show that an amnesty may accelerate this transit, or even make it instantaneous if the amnesty is extensive enough. Copyright 1999 by Blackwell Publishing Inc.

Suggested Citation

  • Macho-Stadler, Ines & Olivella, Pau & Perez-Castrillo, David, 1999. " Tax Amnesties in a Dynamic Model of Tax Evasion," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(4), pages 439-463.
  • Handle: RePEc:bla:jpbect:v:1:y:1999:i:4:p:439-63
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    Cited by:

    1. Matthew Gould & Matthew Rablen, 2016. "Voluntary Disclosure Schemes for Offshore Tax Evasion: An Analysis," CESifo Working Paper Series 5750, CESifo Group Munich.
    2. Eberhard Feess & Markus Walzl, 2005. "Optimal Self-Reporting Schemes with Multiple Stages and Option Values," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(3), pages 265-279, May.
    3. Julio LÛpez Laborda & Fernando Rodrigo Sauco, "undated". "Incidencia de la amnistÌa fiscal de 1991 en el cumplimiento a largo plazo en el IRPF," Studies on the Spanish Economy 106, FEDEA.
    4. Colin C. Williams, 2014. "Confronting the Shadow Economy," Books, Edward Elgar Publishing, number 15370.
    5. Levaggi, Rosella & Menoncin, Francesco, 2012. "Tax audits, fines and optimal tax evasion in a dynamic context," Economics Letters, Elsevier, vol. 117(1), pages 318-321.
    6. Koch, Christian & Müller, Cornelius, 2015. "Anticipated Tax Amnesties and Tax Compliance: An Experimental Study," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112991, Verein für Socialpolitik / German Economic Association.

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