IDEAS home Printed from
   My bibliography  Save this article

An OECD cross-country evidence on the tax evasion and tax rates relationship



    (Hacettepe Üniversitesi)

  • Tarkan CAVUSOGLU

    (Hacettepe Üniversitesi)


The general presumption that tax evasion increases with tax rates has gained a different dimension in the literature with the seminal paper of Allingham and Sandmo (1972) and with the influential note written by Yitzhaki (1974). Both studies put forth that tax evasion may as well be decreasing with higher marginal tax rates under decreasing absolute risk aversion. This study investigates the relationship between tax rates and tax evasion through a cross-country analysis, based on a recently estimated size of tax evasion in OECD economies over the 2000-2010 period. Our panel data estimates imply an inverse relationship between the average income tax rate and evasion, whereas mixed results are obtained for the marginal tax rate with different estimation approaches. However, imposing a quadratic structure on estimations provide strong evidence on the presence of a critical tax rate above which the relationships between evasion and the tax rates are reversed for all estimations unanimously.

Suggested Citation

  • Debi KONUKCU ÖNAL & Tarkan CAVUSOGLU, 2015. "An OECD cross-country evidence on the tax evasion and tax rates relationship," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 30(352), pages 31-54.
  • Handle: RePEc:iif:iifjrn:v:30:y:2015:i:352:p:31-54

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item


    Tax Evasion; Tax Rate; Laffer Curve; OECD; Panel Data.;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iif:iifjrn:v:30:y:2015:i:352:p:31-54. See general 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: (Ali Bilge). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.