Tax evasion as a<Emphasis Type="Italic">de facto</Emphasis> vote of disapproval of PAC contributions

In this study, it is hypothesized that higher (rising) real PAC election campaign contributions may lead the public to increasingly distrust and resent politicians because of the perceived political influence that these contributions exercise. It is further hypothesized that to express that distrust and resentment, the public may make greater efforts to evade income taxation so as to deny tax revenues to the Treasury and “influence-peddling” politicians. Instrumenatal Variable (IV) estimates in first differences that allow for income tax rates, IRS audit rates, IRS penalty assessments on detected unreported income, and the public's dissatisfaction with government per se, find strong, albeit only preliminary, empirical evidence that tax evasion is an increasing function of real PAC election campaign contributions. The author is indebted to Jim Alm, Mike McKee, Joel Slemrod, and Thomas Stratmann and to the University of Miami Economics Seminar faculty and the University of Nevada, Las Vegas Economics Seminar faculty for ideas and helpful comments.     

国外税收结构的收入分配效应研究新进展

目前国外关于税收结构的收入分配效应研究的新进展主要表现在三个方面。第一,税收总量不变情况下一种税收对另一种税收的替代往往存在公平和效率的权衡。一般来说,一种税收对另一种税收的替代在改善收入分配的同时往往不利于经济增长,或者加剧了收入分配但却往往有利于经济增长。第二,不同赶超经济税收结构的收入分配效应存在一些共同点也存在差异。普遍上,"形式上"累进的税收结构在实际过程中并没有改善收入分配,累进所得税因存在大量的逃税而效果有限。第三,税收结构的收入分配效应研究开始应用一些新的分析方法。Bewley模型和CGE模型已经成为了研究税收替代收入分配效应的主流方法,同时,不同的税收累进程度指标选取,收入分配的纵向与横向分解和政府税率结构决策可能受现有收入分配格局影响这三个方面都可能使得研究者重新考察现有分析框架和分析结论。     

The Impact of Marginal Tax Rates on Taxable Income: Evidence from State Income Tax Differentials

The relationship between marginal tax rates and taxable income is analyzed with a large cross section of income tax returns filed by individuals who face different marginal tax rates because of state income tax differentials. The empirical results suggest that an increase in the marginal tax rate reduces taxable income primarily because taxpayers claim larger deductions. High-income taxpayers are found to be more responsive to tax rate changes than lower-income individuals. The findings are compared to those of other recent studies incorporating a wider range of taxpayer responses to tax rate changes than considered in this study.     

Tax evasion and intertemporal choice

It has often been argued that the misreporting of regular wage income is limited by third-party withholding and reporting requirements. However, income arising from savings investment is often not subject to such withholding requirements. This paper uses a simple dynamic model to examine the problem of tax evasion of investment income. Assuming that individuals can misreport investment income but not wage income, it is shown that alterations in the audit rate and penalty rates affect an individual's saving (or investment) decisions. This suggests that parameters traditionally used to control tax evasion impact the aggregate output of an economy and the rate of economic growth. This paper is based on the author's dissertation completed at Virginia Polytechnic Institute and State University. The author is indebted to the dissertation committee, Helmuth Cremer (co-chair), Firouz Gahvari (co-chair), Catherine Eckel, Djavad Salehi-Isfahani, and Richard Steinberg for their guidance and suggestions. All remaining errors are the author's responsibility.     

Taxation in the Tanzanian gold sector: Overview of impacts and possible solutions

This paper analyses the factors that reduce the gold sector's contribution to the Tanzanian government's revenue. Tanzania is among Africa's largest gold exporters. Yet ordinary Tanzanians have seen little benefit from this. This is partly because the government has enacted tax laws that are, as we shall see, overly favourable to multinational mining companies, and partly because of the same companies' business practices. Critics argue that the government fails to capture a substantial amount of state revenue as a result of low royalty rates, unpaid corporate taxes and tax evasion by major gold mine operators. This paper argues that the Tanzanian government should try to increase its share of revenues by taxation based on revenues, increasing its auditing skills and its involvement in mining, as well as by increasing the transparency of contracts and limiting the discretionary power of policy-makers in negotiating contracts.     

Marginal and Average Tax Rates and the Incentive for Self-Employment

The paper examines how the incentives for individuals to take up self-employment, rather than paid employment, are influenced by the marginal and average income tax rate. A model is developed in which an individual optimally chooses the supply of labor effort and the amount of tax to evade. Assuming that remuneration is more responsive to effort but that the opportunities for evasion are greater in self-employment, we find a negative relationship between self-employment and the marginal tax rate but a positive relationship with the average rate. This is supported by empirical evidence for 15 OECD countries over the 1980s.     

Genes and Social Mobility: A Case for Progressive Income Tax

Abstract

The effect of ability inheritance on income distribution and social mobility is analyzed with an emphsis on the role of progressive income tax. Epstein–Zin style utility function is used to highlight the role of risk aversion. The result shows that higher genetic inheritability leads to lower per capita income, higher income variance and lower aggregate welfare at the steady state. This tendency is intensified when the elasticity of a child's income to parent's educational investment is higher. In this setup, it is shown that progressive income tax can be a welfare-enhancing tool by increasing social mobility. The optimal progressive income tax rate is obtained in the benchmark model and its positive effect is discussed in the context of “Veil of ignorance”, a concept proposed by Rawls (A Theory of Justice (Cambridge, MA: Harvard, University Press), 1971).     

Dynamic Scoring in a Romer‐Style Economy

This article analyzes how changes in tax rates affect government revenue in a Romer‐style endogenous growth model. Lower tax rates on financial income (returns to physical capital and intellectual property) are partially self‐financing primarily because lower financial income taxes stimulate innovation and enhance labor productivity in the long run. In the baseline calibration, about half of a tax cut is self‐financing in the long run, substantially more than in the Ramsey model. The dynamics of the economy's response to a tax cut are very sluggish and, for some variables, nonmonotonic.     

Fiscal innovation in nondemocratic regimes: Elites and the adoption of the prussian income taxes of the 1890s

The income tax is a central pillar of the modern fiscal state because of its revenue-raising capacity and administrative sophistication. Existing accounts point to interstate war and class conflict as key drivers of modern fiscal breakthroughs. In this article, we evaluate a third explanation for the origins of fiscal capacity that highlights the importance of intraelite competition for political and economic power in times of rapid industrialization. Modern forms of taxation generated a conflict between industry and agriculture over the distribution of the tax burden across sectors. The presence of electoral institutions that connected tax payments to voting rights created opportunities to overcome this sectoral divide and facilitated the formation of a political consensus for fiscal innovation. The political coalition supporting income tax adoption included higher-income industrial and agricultural elites who anticipated fiscal and electoral gains associated with the adoption of the new tax. Drawing on parliamentary debates in Prussia and additional district-level data, we document both the origins and electoral and economic consequences of the new income tax. We show that the adoption of a highly sophisticated income tax in 1891 shifted the tax burden from land to industry and diluted the political influence of the middle class. The findings clarify the coalitional dynamics leading to fiscal tax adoption in nondemocratic contexts.     

Asset stocks and flows in macroeconomic theory: Resolving the ambiguities in the general IS-LM model

Summary In this paper we have critically examined the macroeconomic model developed by Benavie as a generalization of the beginning-of-period model of Tobin and of Patinkin's end-of-period approach. We have focused our attention on the ambiguous effects on income of government spending changes and tax changes that result from this model. Our conclusions are twofold. First, with respect to the effects of government spending on equilibrium income, we find that, if the demand function for money is decreasing in the interest rate, then the effect of government spending onY is unambiguously positive for any value of. The ambiguity discovered by Benavie is a result of his implicit assumption that money has the characteristics of a Giffen good. Second, in the case of the tax ambiguity, we find the source of the problem to be in the particular formulation of Benavie's asset demand functions. Benavie specifies his asset demand functions in such a way that tax changes impinge directly on these demands. If both stock and flow demands depend upon gross income and not taxes, then there isno ambiguity with respect to tax changes regardless of the value of. However, if both stock and flow demands depend upon disposable income, and hence taxes, the effect of tax changes on equilibrium income becomes ambiguous, but again independently of the value of.     

Income Tax Evasion Revisited: The Impact of Interest Rate Yields on Tax-Free Municipal Bonds

This study empirically investigates a hypothesis that the degree of aggregate federal personal income tax evasion may be influenced by the interest rate yield on high-grade municipal bonds. After allowing for the impacts of a variety of factors that typically have been inferred to influence income tax evasion, it is found that the higher the tax-free interest rate yield on high-grade municipal bonds relative to the taxable yield on 10-year Treasury notes, the lower the aggregate degree of federal personal income tax evasion.     

Pooling my personal account: Income responses to the payroll tax in China

Developing countries collect not only a far lower share of GDP in taxes, but also less payroll taxes than rich countries. This paper explores income responses to the payroll tax by evaluating the 2006 pension reform that subtracted 3 percentage points of employees' Defined Contribution account in China. First, our estimate of total income elasticity with respect to the pension rate is larger than 2, implying a lower optimal payroll tax rate than in rich countries. Second, we separate total income into labor and non-labor income, and show significant income shifting from labor to non-labor income. Third, we provide suggestive evidence that income responses to the pension reform are from evasion rather than real responses. We emphasize the necessity of administrative capacity for developing countries to extend the pension system. Remarkably, sharing the employer payroll tax with employees may be a self-enforcement mechanism, similar to the value-added tax, of the payroll tax.     

用经济学观点审视偷税行为

税收是一国财政收入的主要来源。近年来偷税问题一直困扰各国政府。据我国学者估计我国1990～2000年的税收因偷税流失高达26%～42%左右,情况比较严重,引起各方高度关注。本文首先对偷税和避税的概念进行明确解释,然后从纳税人的角度,利用边际收益和边际成本的比较分析方法阐明其偷税的决策过程,并指出了影响纳税人最佳偷税均衡点的决定性因素;用博弈的观点分析偷税人和税务机关的关系。最后从税务当局的角度指出应该采取哪些措施治理偷税行为。     

The complicit role of local government authorities in corporate bribery: Evidence from a tax collection reform in China

In January 2002, China decided to centralize corporate income tax collection, shifting the collection authority from the local tax bureaus (LTBs) to the state tax bureaus (STBs), for all firms established after December 31, 2001. We exploit this exogenous shock to identify a new cause for corporate bribery, namely, the complicit role of local government authorities. We find that firms whose income taxes are still collected by LTBs after the reform bribe more than similar firms whose taxes are collected by STBs. Such effects are more pronounced for firms located in provinces where government intervention is more prevalent and where judicial system is less independent. Moreover, we find that firms whose taxes are collected by LTBs enjoy lower tax burdens and receive greater tax-related subsidies, especially when they bribe more. Overall, our results highlight the reciprocation between local government authorities and firms in determining corporate bribery.     

To Spend the U.S. Government Surplus or to Increase the Deficit? A Numerical Analysis of the Policy Options

This paper provides a numerical analysis of the likely benefits from adopting alternative ways of reducing the projected fiscal surplus (as of the summer 2001) in the United States economy. Calibrating a small growth model, our results suggest that investing the surplus in public capital is likely to yield the greatest long-run welfare gains, although decreasing the capital income tax is only marginally inferior. Both these options dominate increasing government consumption expenditure or decreasing the tax on labor income. By shifting resources from consumption toward capital the two superior policies involve sharp intertemporal tradeoffs in welfare; significant short-run welfare losses are more than compensated by large long-run welfare gains. By contrast, the two inferior options are gradually welfare-improving through time. A crucial factor in determining the benefits of reducing the government surplus through spending is the size of the government sector relative to the social optimum. We find that the second-best optimum is to increase both forms of government expenditure to their respective social optima, while at the same time restructuring taxes by reducing the tax on capital and raising the tax on wage income to achieve the targeted reduction in the surplus. J. Japan. Int. Econ., December 2002, 16(4), pp. 405–435. Department of Economics, University of Washington, Seattle, Washington; and Department of Economics, Terry College of Business, University of Georgia, Atlanta, Georgia. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: E62, O41.     

Collaborative tax evasion and social norms: why deterrence does not work

This paper makes a preliminary attempt to model a phenomenonof collaborative tax evasion between a seller and his customerand incorporates the social norm into such collusive tax-evadingactivities. It is found that, due to the existence of the socialnorm, more prevalent collaborative tax evasion at the statusquo tends to intensify the extent of the tax evasion itself;this thus furnishes a self-fulfilling equilibrium and it mayalso give rise to multiple equilibria. More importantly, wefind that the snowballing effect stemming from social norm hasa decisive influence not only in determining the conformityof consumers to the tax code, but also the deterrent effectof the authority's tax enforcement. If collaborative tax evasionis initially rampant, raising fines for tax evasion will giverise to a strong venal effect that will increase tax evasion.Once this perverse effect outweighs the usual deterrent effectassociated with raising fines for tax evasion, a more severefine may result in higher rather than lower tax evasion.     

The Impact of Personal Income Tax Structure on Income Inequality for Belgium,Bulgaria, Germany,Lithuania, and Poland: A Comparison of Flat and Graduated Income Tax Structures

The level of income inequality in a country is usually a contentious and politically divisive issue. How the tax structure affects this inequality is of crucial concern to policymakers. In this paper, we examine the income tax experiences of five European Union countries: Belgium, Bulgaria, Germany, Lithuania, and Poland. This paper focuses on the comparison between flat and graduated personal income tax rate structures. Various methods were used to measure the progressivity of income taxes across these countries such as the average tax rate, cumulative shares of income, and the Gini and other indices. The findings show that the graduated rate income tax structure of Germany and Belgium are the most effective at reducing inequality. On the other hand, Lithuania’s proportional income tax structure is much more effective at reducing income inequality when compared to the graduated rate structure of Poland. Also, an appropriately-sized income tax threshold can transform a flat structure to a redistributive one that compares favorably with some graduated rate structures. In the case of Bulgaria, introducing an income tax threshold that is roughly the size of average income would reduce inequality by about 4 %.

     

Tax rate,government revenue and economic performance: A perspective of Laffer curve

The Laffer curve illustrates a theoretical relationship between rates of taxation and the resulting levels of government revenue. This paper explores the relationship between tax rate (direct tax on labor income), government revenue and economic performance in a perspective of the Laffer curve by applying Computable General Equilibrium (CGE) model. The results show that the top of China's Laffer curve is about 40%. The government should consider changes in the entire taxation system and not just changes in direct taxes while increasing direct tax rate. If China wants to maximize tax revenues, the direct tax rate should be 35%. We conduct a variety of sensitivity analyses and conclude that the government tax peak is always 5–10% earlier than the apex of the Laffer curve. So, if a country has reached the top of the Laffer curve, this paper strongly recommends that tax cuts will have positive implications for the economy and government revenue.     

The Impact of Trade Liberalization on Revenue Mobilization and Stability in Sudan

Abstract: This paper attempts to examine key aspects of the Sudanese tax system, paying particular attention to the impact of the recent trade liberalization on government revenues. An eclectic method of analysis is utilized. The results show that the Sudanese tax system as a whole is not buoyant or elastic; the same applies for its major handles. The liberalization reform did not appear to have enhanced revenue productivity and stability in the country. This result indicates the presence of substantial slacks in tax collection and tax evasion. The analysis also shows that tax evasion is the main problem facing tax administration; on average, it stands at about 53 per cent of actual tax yield and 33 per cent of the potential tax yield inclusive of the underground economy's gross domestic product (GDP). Assessment of the determinants of trade revenue suggests that the yield of trade tax has improved due to liberalization; however, the marginal benefit of tax evasion is still considerable. The findings imply that a committed tax reform is crucial for augmenting tax revenue yield as well as for fiscal consolidation and macroeconomic stability.     

Why People Pay Taxes: The Case of the Development Levy in Tanzania

This paper examines factors determining tax compliance behavior in local authorities in Tanzania. The case study is the poll tax—locally named “development levy.” The study finds support for the hypothesis that tax compliance is positively related to factors such as ability to pay, the (perceived) probability of being prosecuted, and the number of tax evaders known personally by the respondent. Oppressive tax enforcement, harassment of taxpayers, and discontent with public service delivery seem to increase tax resistance and may explain widespread tax evasion.