Shadow Economy and Tax Evasion: A Panel VAR approach. The Case of E.U.27
The paper investigates the biunivoque relationship between shadow economy (s) and tax evasion (t), considering a panel data-series, from 1997 to 2005, in the case of European Union 27 (E.U.27) countries. The empirical results show that: (1) A positive 1% impulse in s determines a strong descendent reaction of t on short term (first 2-3 years), becoming “aggressive descendent” on the medium and long term, and (2) A positive 1% impulse in t determines a very low ascendant reaction of s’s level on medium and long term. The main finding reveals that the relationship between shadow economy and tax evasion has different amplitude and signs.
Volume (Year): 1 (2011)
Issue (Month): 1 (September)
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