Tax Amnesties as Asset Laundering Devices
Tax amnesties are frequently offered by governments to induce citizens to voluntarily declare black assets accumulated from past tax evasion, especially in developing countries with a large ,underground' economy. The resulting switch in a citizen asset portfolios in favor of white assets could conceivably enhance compliance following the amnesty. In contrast, if the amnesty is anticipated then it is likely to lower compliance in pre-amnesty years. A dynamic model of tax compliance confirms these conjectures under plausible assumptions, but finds that the effects on net revenue collections from an amnesty may diverge substantially from the effects on compliance. For instance, if the pre-tax rate of return on black assets is higher than on white assets, and taxpayers are risk neutral, then an unanticipated amnesty is shown to lower aggregate net revenues following the amnesty, owing to lowered collection from penalties. On the other hand, positive revenue effects may result from an anticipated amnesty, though such outcomes can be ruled out if black asset stocks are large relative to white, and enforcement is weak. Myopic governments who place a high value on current vis-a-vis future revenues may still declare amnesties as revenue gains from increased compliance are visible and immediate, while reduced collections from penalties are invisible and stretched out into the future. Alternative justifications may be sought in improved risk-sharing between evaders and the government, or resulting economies in prosecution costs, but these require the government to possess detailed information concerning distributions over citizen characteristics in order the set the amnesty rates correctly.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Dec 1995|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.bu.edu/econ/ied/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:fth:bosecd:69. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel)
If references are entirely missing, you can add them using this form.