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Income Tax Evasion, Inequality and Poverty

Author

Listed:
  • Panos Pashardes

    () (Department of Economics and Economics Research Centre, University of Cyprus)

  • Alexandros Polycarpou

    (Economics Research Centre, University of Cyprus)

Abstract

This paper uses a consumer demand based method to estimate the extent to which households in Cyprus under-report their income from self-employment, capital income and income from agriculture. On the basis of these estimates, the size of black economy appears to be around 7–8% of GDP. We find that income under-reporting biases measures of inequality and poverty downwards, suggesting that egalitarian and antipoverty policies need to become more generous, but also more carefully targeted to avoid false entitlement to social benefits. The high tax free income undoubtedly helps reduce the size of the tax evasion problem in Cyprus.

Suggested Citation

  • Panos Pashardes & Alexandros Polycarpou, 2008. "Income Tax Evasion, Inequality and Poverty," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 2(2), pages 37-49, December.
  • Handle: RePEc:erc:cypepr:v:2:y:2008:i:2:p:37-49
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    Citations

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    Cited by:

    1. Matsaganis, Manos & Benedek, Dóra & Flevotomou, Maria & Lelkes, Orsolya & Mantovani, Daniela & Nienadowska, Sylwia, 2010. "Distributional implications of income tax evasion in Greece, Hungary and Italy," MPRA Paper 21465, University Library of Munich, Germany.
    2. Manos Matsaganis & Chrysa Leventi & Maria Flevotomou, 2012. "The Crisis and Tax Evasion in Greece: What are the Distributional Implications?," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(2), pages 26-32, July.
    3. Efthymiou, Leonidas & Michael, Sophia, 2013. "When Cards and ATM’s are the only choice: A fortnight in Cyprus with no banking system, nor trust," MPRA Paper 50646, University Library of Munich, Germany.
    4. Koutsampelas, Christos, 2014. "The introduction of a GMI scheme in Cyprus: family structure, equivalence scales and policy challenges," EUROMOD Working Papers EM10/14, EUROMOD at the Institute for Social and Economic Research.
    5. Leventi, Chrysa & Matsaganis, Manos & Flevotomou, Maria, 2013. "Distributional implications of tax evasion and the crisis in Greece," EUROMOD Working Papers EM17/13, EUROMOD at the Institute for Social and Economic Research.
    6. Manos Matsaganis & Maria Flevotomou, 2010. "Distributional Implications of Tax Evasion in Greece," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 31, Hellenic Observatory, LSE.
    7. Christos Koutsampelas, 2011. "Social transfers and income distribution in Cyprus," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 5(2), pages 35-55, December.
    8. Matsaganis, Manos & Flevotomou, Maria, 2010. "Distributional implications of tax evasion in Greece," LSE Research Online Documents on Economics 26074, London School of Economics and Political Science, LSE Library.

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