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Tax Evasion and Inequality

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  • Alstadsaeter, Annette
  • Johannesen, Niels
  • Zucman, Gabriel

Abstract

This paper estimates the size and distribution of tax evasion. We combine random audits, tax amnesties, and leaks from offshore financial institutions matched to wealth records in Scandinavia. Tax evasion rises sharply with wealth: 3% of personal taxes are evaded on average, versus 25%–30% in the top 0.01% of the wealth distribution. A model of the supply of evasion services can explain this gradient. Taking tax evasion into account increases inequality substantially. After using tax amnesties, evaders do not seem to increase legal tax avoidance, suggesting that fighting evasion can allow governments to collect more taxes from the wealthy.

Suggested Citation

  • Alstadsaeter, Annette & Johannesen, Niels & Zucman, Gabriel, 2018. "Tax Evasion and Inequality," CEPR Discussion Papers 12781, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12781
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    References listed on IDEAS

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    13. Niels Johannesen & Tim Stolper, 2017. "The Deterrence Effect of Whistleblowing: An Event Study of Leaked Customer Information from Banks in Tax Havens," CESifo Working Paper Series 6784, CESifo Group Munich.
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    15. Nikolaos Artavanis & Adair Morse & Margarita Tsoutsoura, 2016. "Measuring Income Tax Evasion Using Bank Credit: Evidence from Greece," The Quarterly Journal of Economics, Oxford University Press, vol. 131(2), pages 739-798.
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    Cited by:

    1. Niels Johannesen & Tim Stolper, 2017. "The Deterrence Effect of Whistleblowing: An Event Study of Leaked Customer Information from Banks in Tax Havens," CESifo Working Paper Series 6784, CESifo Group Munich.
    2. Ralph-C. Bayer & Roland Hodler & Paul A. Raschky & Anthony Strittmatter, 2018. "Expropriations, Property Confiscations and New Offshore Entities: Evidence from the Panama Papers," CESifo Working Paper Series 7328, CESifo Group Munich.
    3. Laila Ait Bihi Ouali, 2019. "Top Income Tax Evasion and Redistribution Preferences: Evidence from the Panama Papers," Working Papers halshs-01978131, HAL.
    4. L. S. Di Mauro & A. Pluchino & A. E. Biondo, 2018. "A Game of Tax Evasion: evidences from an agent-based model," Papers 1809.08146, arXiv.org.
    5. Bastani, Spencer & Waldenström, Daniel, 2018. "How Should Capital Be Taxed? Theory and Evidence from Sweden," IZA Discussion Papers 11475, Institute for the Study of Labor (IZA).
    6. Niels Johannesen & Tim B.M. Stolper, 2017. "The deterrence effect of whistleblowing," EPRU Working Paper Series 17-01, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    7. Boehl, Gregor & Fischer, Thomas, 2017. "Capital Taxation and Investment: Matching 100 Years of Wealth Inequality Dynamics," Working Papers 2017:8, Lund University, Department of Economics.
    8. repec:eee:pubeco:v:162:y:2018:i:c:p:89-100 is not listed on IDEAS
    9. repec:eee:pubeco:v:162:y:2018:i:c:p:63-77 is not listed on IDEAS
    10. repec:ces:ifodic:v:16:y:2018:i:2:p:50000000002754 is not listed on IDEAS
    11. Lin Yang, 2018. "The relationship between poverty and inequality: Resource constraint mechanisms," CASE Papers /212, Centre for Analysis of Social Exclusion, LSE.
    12. Lin Yang, 2018. "The net effect of housing-related costs and advantages on the relationship between inequality and poverty," CASE Papers /211, Centre for Analysis of Social Exclusion, LSE.
    13. Garbinti, Bertrand & Goupille-Lebret, Jonathan & Piketty, Thomas, 2018. "Income inequality in France, 1900–2014: Evidence from Distributional National Accounts (DINA)," Journal of Public Economics, Elsevier, vol. 162(C), pages 63-77.
    14. repec:bla:worlde:v:41:y:2018:i:9:p:2491-2527 is not listed on IDEAS
    15. Florian Dorn & Christoph Schinke, 2018. "Top income shares in OECD countries: The role of government ideology and globalisation," The World Economy, Wiley Blackwell, vol. 41(9), pages 2491-2527, September.
    16. repec:eee:dyncon:v:87:y:2018:i:c:p:152-172 is not listed on IDEAS
    17. Sala, Hector, 2018. "A Fresh Look at Fiscal Redistribution and Inequality in the US across Electoral Cycles," IZA Discussion Papers 11839, Institute for the Study of Labor (IZA).
    18. Alstadsæter, Annette & Johannesen, Niels & Zucman, Gabriel, 2018. "Who owns the wealth in tax havens? Macro evidence and implications for global inequality," Journal of Public Economics, Elsevier, vol. 162(C), pages 89-100.
    19. Ozili, Peterson, 2018. "Tax Evasion and Financial Instability," MPRA Paper 88430, University Library of Munich, Germany.
    20. Alexander Krenek & Margit Schratzenstaller, 2018. "A European Net Wealth Tax," WIFO Working Papers 561, WIFO.
    21. Katrine Jakobsen & Kristian Jakobsen & Henrik Kleven & Gabriel Zucman, 2018. "Wealth Taxation and Wealth Accumulation: Theory and Evidence from Denmark," NBER Working Papers 24371, National Bureau of Economic Research, Inc.
    22. Orsetta Causa & Anna Vindics & Oguzhan Akgun, 2018. "An empirical investigation on the drivers of income redistribution across OECD countries," OECD Economics Department Working Papers 1488, OECD Publishing.
    23. repec:eee:gamebe:v:107:y:2018:i:c:p:123-134 is not listed on IDEAS
    24. repec:gam:jlawss:v:7:y:2018:i:3:p:31-:d:165334 is not listed on IDEAS

    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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