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Tax Evasion Dynamics in the Czech Republic: First Evidence of an Evasional Kuznets Curve

Author

Listed:
  • Jan Hanousek
  • Filip Palda

Abstract

Using surveys of the Czech Republic taken in 2000, 2002, 2004, and 2006 we measure how the percentage of tax evaders evolved from 1995 until 2006. We find that at first evasion rose, leveled off, and then fell along a quadratic path, suggesting the existence of what we call an evasional Kuznets curve. Our paper is the first to document the existence of an evasional Kuznets curve and to show how it can help improve Markov-chain predictions of tax evasion. We conclude by suggesting that the evasional Kuznets curve may be a subset of a larger trend in evasion for both transitional and developed economies.

Suggested Citation

  • Jan Hanousek & Filip Palda, 2008. "Tax Evasion Dynamics in the Czech Republic: First Evidence of an Evasional Kuznets Curve," CERGE-EI Working Papers wp360, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
  • Handle: RePEc:cer:papers:wp360
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    File URL: http://www.cerge-ei.cz/pdf/wp/Wp360.pdf
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    References listed on IDEAS

    as
    1. Matsusaka, John G & Palda, Filip, 1999. "Voter Turnout: How Much Can We Explain?," Public Choice, Springer, vol. 98(3-4), pages 431-446, March.
    2. Niepelt, Dirk, 2003. "Tax Evasion Dynamics," Seminar Papers 721, Stockholm University, Institute for International Economic Studies.
    3. Orviska, Marta & Hudson, John, 2003. "Tax evasion, civic duty and the law abiding citizen," European Journal of Political Economy, Elsevier, vol. 19(1), pages 83-102, March.
    4. Jan Hanousek & Filip Palda, 2006. "Problems measuring the underground economy in transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 14(4), pages 707-718, October.
    5. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
    6. Christos Constantatos & Edwin G. West, 1991. "Measuring Returns from Education: Some Neglected Factors," Canadian Public Policy, University of Toronto Press, vol. 17(2), pages 127-138, June.
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    Citations

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    Cited by:

    1. Johannes Koettl & Truman Packard & Claudio E. Montenegro, 2012. "In From the Shadow : Integrating Europe's Informal Labor," World Bank Publications, The World Bank, number 9377, April.
    2. Leibfritz, Willi, 2011. "Undeclared economic activity in central and eastern Europe -- how taxes contribute and how countries respond to the problem," Policy Research Working Paper Series 5923, The World Bank.
    3. Torgler, Benno, 2011. "Tax morale, eastern Europe and European enlargement," Policy Research Working Paper Series 5911, The World Bank.
    4. Torgler, Benno, 2011. "Tax morale and compliance : review of evidence and case studies for Europe," Policy Research Working Paper Series 5922, The World Bank.

    More about this item

    Keywords

    Underground economy; tax evasion; Markov chains; transition; evasional Kuznets curve.;

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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