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Tax Amnesties as Asset Laundering Devices


  • Arindam Das-Gupta
  • Dilip Mookherjee


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.

Suggested Citation

  • Arindam Das-Gupta & Dilip Mookherjee, 1995. "Tax Amnesties as Asset Laundering Devices," Boston University - Institute for Economic Development 69, Boston University, Institute for Economic Development.
  • Handle: RePEc:fth:bosecd:69

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    Cited by:

    1. Motta, Massimo & Polo, Michele, 2003. "Leniency programs and cartel prosecution," International Journal of Industrial Organization, Elsevier, vol. 21(3), pages 347-379, March.
    2. Christoph Zaborowski & Peter Zweifel, 1999. "Getting Out of Debt: Garnishment of Wage in Whose Interest?," European Journal of Law and Economics, Springer, vol. 8(3), pages 207-230, November.
    3. Zaborowski Christoph & Zweifel Peter, 2002. "Wege aus der Verschuldung: Reform der Lohnpfändung / Getting Out of Debt: Reforming the Garnishment of Wage," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 222(2), pages 258-279, April.
    4. Motta, Alberto & Burlando, Alfredo, 2007. "Self reporting reduces corruption in law enforcement," MPRA Paper 5332, University Library of Munich, Germany, revised 23 Jun 2007.
    5. Bruno Chiarini & Marco Di Domizio & Elisabetta Marzano, 2009. "Why Do Underground Reducing Policies Often Fail Their Scope? Some Answers From The Italian Experience," Economics and Politics, Wiley Blackwell, vol. 21(2), pages 308-318, July.
    6. Julio López Laborda & Fernando Rodrigo Sauco, 2002. "El análisis económico de las amnistías fiscales: ¿Qué hemos aprendido hasta ahora?," Hacienda Pública Española / Review of Public Economics, IEF, vol. 163(4), pages 121-153, December.
    7. Sandro Momigliano & Pietro Rizza, 2007. "Temporary measures in Italy: buying or losing time?," MNB Conference Volume, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 1(1), pages 61-71, December.
    8. Garz, Marcel & Pagels, Verena, 2018. "Cautionary tales: Celebrities, the news media, and participation in tax amnesties," Journal of Economic Behavior & Organization, Elsevier, vol. 155(C), pages 288-300.

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