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Working Paper 09-10 - Shifting of red tape? The impact of authority behavior on tax compliance costs


  • Sebastian Eichfelder
  • Chantal Kegels


The compliance costs of private taxpayers are not only affected by the tax law itself but also by its implementation through the tax authorities. In the following paper we analyze the effect of administrative actions on the compliance costs of private businesses. We demonstrate in a theoretical model that compliance costs may partially be interpreted as externalities of authority behavior. As a result we expect a ”shifting” of administrative cost burdens from the tax administration to private taxpayers, what implies an economically inefficient outcome. Based on Belgian survey data, we find empirical evidence for the elucidated relationship. We give an quantitative estimate for the accordant effects and demonstrate, which activities of the administration are the most important cost drivers. Furthermore, we find empirical support that the effect of administrative issues is independent from the impact of the tax law itself.

Suggested Citation

  • Sebastian Eichfelder & Chantal Kegels, 2010. "Working Paper 09-10 - Shifting of red tape? The impact of authority behavior on tax compliance costs," Working Papers 1009, Federal Planning Bureau, Belgium.
  • Handle: RePEc:fpb:wpaper:1009

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    References listed on IDEAS

    1. Timothy Smeeding & Eva Sierminska & Andrea Brandolini, 2006. "Cross National Comparison of Income and Wealth Status in Retirement: First Results from the Luxembourg Wealth Study (LWS)," LWS Working papers 2, LIS Cross-National Data Center in Luxembourg.
    2. Cathal O'Donoghue & John Lennon & Stephen Hynes, 2009. "The Life-Cycle Income Analysis Model (LIAM): a study of a flexible dynamic microsimulation modelling computing framework," International Journal of Microsimulation, International Microsimulation Association, vol. 2(1), pages 16-31.
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    More about this item


    Administrative burdens; Compliance costs; Quality of tax administration;

    JEL classification:

    • K29 - Law and Economics - - Regulation and Business Law - - - Other
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General


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