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Tax Uncertainty and Welfare-Improving Tax Disputes

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  • Nigar Hashimzade

Abstract

Tax law is often uncertain. In particular, the use of tax shelters tends to be in the “grey area” between illegal tax evasion and legal tax avoidance. In this paper I show that uncertainty in tax law can help achieve higher efficiency than allowing or disallowing a tax shelter with certainty. Furthermore, a tax dispute can lead to a net welfare gain despite the litigation costs. Thus, tax uncertainty and tax disputes can be socially desirable.

Suggested Citation

  • Nigar Hashimzade, 2023. "Tax Uncertainty and Welfare-Improving Tax Disputes," CESifo Working Paper Series 10392, CESifo.
    • Handle: RePEc:ces:ceswps:_10392
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp10392.pdf
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    References listed on IDEAS

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    4. Kaplow, Louis, 1998. "Accuracy, Complexity, and the Income Tax," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 14(1), pages 61-83, April.
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    More about this item

    Keywords

    tax uncertainty; tax shelter; tax avoidance; rent-seeking;
    All these keywords.

    JEL classification:

    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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