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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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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

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