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On the Excess Burden of Tax Evasion

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  • Shlomo Yitzhaki

    (Hebrew University and the World Bank)

Abstract

A simple model of tax evasion is presented leading to the following conclusions: (1) Tax evasion is a function of, inter alia, the marginal tax rate only if the probability of being caught is a function of undeclared income; (2) Tax evasion introduces uncertainty, which causes a utility loss. An example is presented showing that the excess burdens of tax evasion and the income tax are sometimes additive. Thus ignoring the excess burden of tax evasion will usually lead to underestimation of the total excess burden of a tax .

Suggested Citation

  • Shlomo Yitzhaki, 1987. "On the Excess Burden of Tax Evasion," Public Finance Review, , vol. 15(2), pages 123-137, April.
    • Handle: RePEc:sae:pubfin:v:15:y:1987:i:2:p:123-137
    DOI: 10.1177/109114218701500201
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    References listed on IDEAS

    as
    1. Srinivasan, T. N., 1973. "Tax evasion: A model," Journal of Public Economics, Elsevier, vol. 2(4), pages 339-346.
    2. repec:bla:ecorec:v:55:y:1979:i:150:p:267-70 is not listed on IDEAS
    3. Christiansen, Vidar, 1980. "Two comments on tax evasion," Journal of Public Economics, Elsevier, vol. 13(3), pages 389-393, June.
    4. Weiss, Laurence, 1976. "The Desirability of Cheating Incentives and Randomness in the Optimal Income Tax," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1343-1352, December.
    5. Alm, James, 1985. "The Welfare Cost of the Underground Economy," Economic Inquiry, Western Economic Association International, vol. 23(2), pages 243-263, April.
    6. Yaari, Menahem E., 1969. "Some remarks on measures of risk aversion and on their uses," Journal of Economic Theory, Elsevier, vol. 1(3), pages 315-329, October.
    7. Geoffrey Fishburn, 1979. "On How to Keep Tax Payers Honest (or almost so)," The Economic Record, The Economic Society of Australia, vol. 55(3), pages 267-270, September.
    8. Singh, Balbir, 1973. "Making honesty the best policy," Journal of Public Economics, Elsevier, vol. 2(3), pages 257-263, July.
    9. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
    10. Pencavel, John H., 1979. "A note on income tax evasion, labor supply, and nonlinear tax schedules," Journal of Public Economics, Elsevier, vol. 12(1), pages 115-124, August.
    11. Yitzhaki, Shlomo, 1974. "Income tax evasion: A theoretical analysis," Journal of Public Economics, Elsevier, vol. 3(2), pages 201-202, May.
    12. Christiansen, Vidar, 1980. "Two Comments on Tax Evasion," Empirical Economics, Springer, vol. 13(3), pages 389-393, June.
    Full references (including those not matched with items on IDEAS)

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