Taxing Hard-to-Tax Markets
Tax enforcement costs constrain the government?s ability to observe economic transactions, giving rise to hard-to-tax (HTT) markets. In these markets transactions are untaxed and consumers are better off than in taxed markets. This paper studies a novel approach to combat evasion in HTT markets: consumer auditing, which rewards consumers for requesting transaction receipts. We develop a Hotelling-type spatial model of sales taxation to analyze the welfare and distributional effects of the implementation of this policy. We find that consumer auditing allows for a lower tax rate and greater provision of the public good in the economy. We show that this policy not only can enhance welfare, but also equalize utilities of consumers across markets.
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- Carla Marchese, 2009.
"Rewarding the Consumer for Curbing the Evasion of Commodity Taxes?,"
FinanzArchiv: Public Finance Analysis,
Mohr Siebeck, Tübingen, vol. 65(4), pages 383-402, December.
- Marchese, Carla, 2006. "Rewarding the consumer for curbing the evasion of commodity taxes?," POLIS Working Papers 72, Institute of Public Policy and Public Choice - POLIS.
- Das-Gupta, Arindam, 1994. "A Theory of Hard-to-Tax Groups," Public Finance = Finances publiques, , vol. 49(Supplemen), pages 28-39.
- Gordon, Roger & Li, Wei, 2009. "Tax structures in developing countries: Many puzzles and a possible explanation," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 855-866, August.
- Roger Gordon & Wei Li, 2005. "Tax Structure in Developing Countries: Many Puzzles and a Possible Explanation," NBER Working Papers 11267, National Bureau of Economic Research, Inc.
- Robin Boadway & Nicolas Marceau & Steeve Mongrain, 2007. "Redistributive Taxation under Ethical Behaviour," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(3), pages 505-529, 09.
- Robin Boadway & Nicolas Marceau & Steeve Mongrain, 2006. "Redistributive Taxation Under Ethical Behaviour," Cahiers de recherche 0604, CIRPEE.
- James Alm and Joege Martinez Vazquez, 2003. ""Sizing" the problem of the Hard-to-Tax," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0321, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
- Juin-jen Chang & Ching-chong Lai, 2004. "Collaborative tax evasion and social norms: why deterrence does not work," Oxford Economic Papers, Oxford University Press, vol. 56(2), pages 344-368, April. Full references (including those not matched with items on IDEAS)
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