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Tax Evasion in Interrelated Taxes

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  • Alejandro Esteller

    (Institut d'Economia de Barcelona (IEB); Universitat de Barcelona (UB))

Abstract

In 1969, Shoup postulated that the presence of interrelated taxes in a tax system would reinforce the tax penalty system ("self-reinforcing penalty system of taxes"). In this paper, we have tried to formally develop this idea. We find that in order for tax reinforcement to be maintained, it is necessary for interrelated taxes to be administered by a single tax administration, or if they are administered by different tax administrations, the level of collaboration between them has to be sufficiently high. If so, tax evasion in interrelated taxes might be considered as an alternative explanation for the gap between the levels of tax evasion that can be guessed in practice and the much higher levels predicted by the classical tax evasion theory (Allingham and Sandmo, 1972; Yitzhaki, 1974). Otherwise, the result anticipated by Shoup may even be reversed. Moreover, as long as collaboration is imperfect, the classical results of the comparative statics might change, since in some cases, although global tax compliance increases when faced with a variation in a tax parameter, it can decrease in a single tax.

Suggested Citation

  • Alejandro Esteller, 2004. "Tax Evasion in Interrelated Taxes," Working Papers 2004/2, Institut d'Economia de Barcelona (IEB).
    • Handle: RePEc:ieb:wpaper:doc2004-2
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    Cited by:

    1. Mario A. Maggioni, 2004. "The rise and fall of industrial clusters: Technology and the life cycle of region," Working Papers 2004/6, Institut d'Economia de Barcelona (IEB).
    2. Núria Bosch & Albert Solé-Ollé, 2007. "Yardstick competition and the political costs of raising taxes: An empirical analysis of Spanish municipalities," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(1), pages 71-92, February.
    3. Bruno S. Frey & Benno Torgler, 2004. "Taxation and Conditional Taxation," Working Papers 2004/7, Institut d'Economia de Barcelona (IEB).
    4. Mario A. Maggioni, 2004. "The rise and fall of industrial clusters: Technology and the life cycle of region," Working Papers 2004/6, Institut d'Economia de Barcelona (IEB).
    5. José Mª Durán Cabré & Alejandro Esteller Moré, 2007. "An empirical analysis of wealth taxation: Equity Vs.tax compliance," Working Papers XREAP2007-03, Xarxa de Referència en Economia Aplicada (XREAP), revised Jun 2007.
    6. Bruno S. Frey & Benno Torgler, 2004. "Taxation and Conditional Taxation," Working Papers 2004/7, Institut d'Economia de Barcelona (IEB).
    7. Núria Bosch & Albert Solé-Ollé, 2007. "Yardstick competition and the political costs of raising taxes: An empirical analysis of Spanish municipalities," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(1), pages 71-92, February.

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    More about this item

    Keywords

    Self-reinforcing penalty system of taxes; Tax evation;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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