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On income tax avoidance: the case of Germany

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  • Lang, Oliver
  • Nöhrbaß, Karl-Heinz
  • Stahl, Konrad O.

Abstract

In this paper, we present a micro estimate determining taxable income as a function of gross income and all major deduction options depending on household and asset categories. It is shown that tax savings strongly increase with increasing income, resulting in a decreasing effective marginal tax rate for the highest income groups. We compute a lower bound on 1983 aggregate income tax losses to the German fiscal authorities of DM 72b, or of 45 % of wage and income taxes paid in 1983. The estimate of tax loss exceeds estimates for other countries by orders of magnitude.

Suggested Citation

  • Lang, Oliver & Nöhrbaß, Karl-Heinz & Stahl, Konrad O., 1993. "On income tax avoidance: the case of Germany," ZEW Discussion Papers 93-05, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:9305
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    1. Borsch-Supan, Axel & Stahl, Konrad, 1991. "Do savings programs dedicated to home-ownership increase personal savings? : An analysis of the West German Bausparkassen system," Journal of Public Economics, Elsevier, vol. 44(3), pages 265-297, April.
    2. Crane, Steven E & Nourzad, Farrokh, 1986. "Inflation and Tax Evasion: An Empirical Analysis," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 217-223, May.
    3. Suits, Daniel B & Mason, Andrew & Chan, Louis, 1978. "Spline Functions Fitted by Standard Regression Methods," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 132-139, February.
    4. Slemrod, Joel B, 1985. "An Empirical Test for Tax Evasion," The Review of Economics and Statistics, MIT Press, vol. 67(2), pages 232-238, May.
    5. Slemrod, Joel, 1990. "Optimal Taxation and Optimal Tax Systems," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 157-178, Winter.
    6. Dubin, Jeffrey A & Graetz, Michael J & Wilde, Louis L, 1987. "Are We a Nation of Tax Cheaters? New Econometric Evidence on Tax Compliance," American Economic Review, American Economic Association, vol. 77(2), pages 240-245, May.
    7. Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-373, August.
    8. Dubin, Jeffrey A. & Graetz, Michael J. & Wilde, Louis L., 1990. "The Effect of Audit Rates on the Federal Individual Income Tax, 1977-1986," National Tax Journal, National Tax Association;National Tax Journal, vol. 43(4), pages 395-409, December.
    9. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
    10. Laitila, Thomas, 1993. "A pseudo-R2 measure for limited and qualitative dependent variable models," Journal of Econometrics, Elsevier, vol. 56(3), pages 341-355, April.
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