IDEAS home Printed from https://ideas.repec.org/a/sae/pubfin/v32y2004i2p183-195.html
   My bibliography  Save this article

Tax Evasion and Relative Tax Contribution

Author

Listed:
  • Judith Panadés

Abstract

This article analyzes the relationship between tax rate levels and tax evasion in a context where the utility of a taxpayer depends on both his or her own consumption and relative position with respect to the average declared income of the economy. In this framework, if the taxpayer declares an amount of his or her income greater (smaller) than the average of the economy, that person’s utility will decrease (increase). The author shows that, if the externality from the others’ declared income is taken into account, several equilibria arise in the economy. Then, an increase in the tax rate leads to a larger amount of unreported income at the equilibrium displaying the lowest income reports. This comparative statics result agrees with most of the existing empirical evidence.

Suggested Citation

  • Judith Panadés, 2004. "Tax Evasion and Relative Tax Contribution," Public Finance Review, , vol. 32(2), pages 183-195, March.
  • Handle: RePEc:sae:pubfin:v:32:y:2004:i:2:p:183-195
    as

    Download full text from publisher

    File URL: http://pfr.sagepub.com/content/32/2/183.abstract
    Download Restriction: no

    References listed on IDEAS

    as
    1. Besley, Timothy & Case, Anne, 1995. "Incumbent Behavior: Vote-Seeking, Tax-Setting, and Yardstick Competition," American Economic Review, American Economic Association, vol. 85(1), pages 25-45, March.
    2. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
    3. Hoyt William H., 1993. "Tax Competition, Nash Equilibria, and Residential Mobility," Journal of Urban Economics, Elsevier, vol. 34(3), pages 358-379, November.
    4. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    5. Craig, Steven G., 1987. "The impact of congestion on local public good production," Journal of Public Economics, Elsevier, vol. 32(3), pages 331-353, April.
    6. Saavedra, Luz Amparo, 2000. "A Model of Welfare Competition with Evidence from AFDC," Journal of Urban Economics, Elsevier, vol. 47(2), pages 248-279, March.
    7. Can, Ayse, 1992. "Specification and estimation of hedonic housing price models," Regional Science and Urban Economics, Elsevier, vol. 22(3), pages 453-474, September.
    8. Masayoshi Hayashi & Robin Boadway, 2001. "An empirical analysis of intergovernmental tax interaction: the case of business income taxes in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 34(2), pages 481-503, May.
    9. Figlio, David N. & Kolpin, Van W. & Reid, William E., 1999. "Do States Play Welfare Games?," Journal of Urban Economics, Elsevier, vol. 46(3), pages 437-454, November.
    10. Case, Anne C. & Rosen, Harvey S. & Hines, James Jr., 1993. "Budget spillovers and fiscal policy interdependence : Evidence from the states," Journal of Public Economics, Elsevier, vol. 52(3), pages 285-307, October.
    11. Edwards, John H. Y., 1990. "Congestion function specification and the "publicness" of local public goods," Journal of Urban Economics, Elsevier, vol. 27(1), pages 80-96, January.
    12. Fredriksson, Per G. & Millimet, Daniel L., 2002. "Strategic Interaction and the Determination of Environmental Policy across U.S. States," Journal of Urban Economics, Elsevier, vol. 51(1), pages 101-122, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Goerke, Laszlo, 2013. "Relative consumption and tax evasion," Journal of Economic Behavior & Organization, Elsevier, vol. 87(C), pages 52-65.
    2. Jordi Caballé & Judith Panadés, 2007. "Tax Rates, Tax Evasion, and Growth in a Multi-period Economy," Hacienda Pública Española, IEF, vol. 183(4), pages 67-80, december.
    3. Syed Hassan Raza & Syed Muddassir Abbas Naqvi, 2016. "Impact of Tax Evasion on Total Tax in Pakistan," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 6(11), pages 730-739, November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    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:sae:pubfin:v:32:y:2004:i:2:p:183-195. 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: (SAGE Publications). 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.