taxing the unobservable the impact of the shadow economy on inflation and taxation summary because the shadow economy cannot be taxed it erodes the tax base and reduces tax revenues forcing governments to resort to other ways to finance their expenditures accordingly a larger shadow economy should give governments an incentive to shift revenue sources from taxes to inflation in line with the public finance motive of inflation in this paper we recall that point in a simple canonical model then empirically test it in a sample of up to 153 developed and developing countries over the 1999 2007 period in line with the model s prediction we indeed observe a positive relation between inflation and the size of the shadow economy and a negative relation between the tax burden and the size of the shadow economy we find that both relations are conditional on central bank independence and on the exchange rate regime implying that it is the strongest in institutional set ups that constrain monetary policy the least both relations are present in the sub sample of developed countries as well as the sub sample of developing countries both relations survive several robustness checks using various sets of control variables including the stock of debt controlling for endogeneity using alternative estimates of the shadow economy and estimating the two relations as a system of equations

china s engagement with neo liberalism path dependency geography and party self reinvention china s post mao market reform even after the asian crisis does not conform to the standard imf world bank model and the state continues to mediate market reform three principal factors have influenced how the state mediates china s market reform path dependency a result of china s communist and nationalist revolution china s geography which favours developmental state type industrialisation and most important of all the chinese communist party s successful post mao self reinvention that has enabled it to remain in power as a monopolistic party these factors determine that china s engagement with neo liberalism will be a loose hug rather than an intimate embrace

an economic analysis of tax amnesties abstract tax amnesties have frequently been justified as politically popular ways to generate increases in government revenue this paper examines the circumstances under which amnesties are likely to have a beneficial impact on revenue collections it concludes that while in general it may be correct to impose a reduced penalty on individuals who voluntarily disclose tax evasion shortlived amnesties of the type most frequently observed in practice are unlikely to generate genuinely additional revenue particularly when judged against the potential danger of reducing future tax compliance

on the economic rationale of estimating the hidden economy the estimation of the hidden economy may be considered as a human passion for knowing the unknown although a large literature on the hidden economy exists the subject is still controversial at a very basic level there are disagreements about 1 the definition of the hidden activities 2 the terms used to describe these activities 3 the estimation or measurement procedures and finally 4 on the use of these estimates in economic analysis in this paper we will only consider the issues related to estimation economic and econometric analysis of the hidden economy thus we implicitly accept the term hidden economy and explicitly state the definition before entering into the main discussions for a comprehensive study of past literature readers are referred to feige 1989 gaertner and wenig 1985 and tanzi 1982 and the large number of references in these books the use of the hidden economy estimates for economic and econometric analysis can be classified into three potentially distinct but interrelated categories a the derivation of economic theory and or its implication for the existing theories b the formulation of economic policies and c econometric modelling if we consider that the tax evaded income is the only constituent of the hidden economy then the issues are almost obvious for all three categories however as we will see later such a simple interpretation of the hidden economy estimates is generally not possible for example in this paper we define the hidden economy as the unrecorded national income the unrecorded national income is calculated as the difference between the potential national income for the given currency in circulation and the recorded national income this definition of the hidden economy suggests that in principle it is larger than the tax evaded income the empirical illustrations are taken from the studies conducted in the united kingdom and india where this is a workable definition however for many other countries such an approach is totally inadequate as a measure of unrecorded national income since the method of estimating the hidden economy is constrained by the structure of the economy in this paper we shall present a brief description of a general method of estimating the hidden economy and appraise the applicability and limitation of the method due to space constraint we shall discuss very briefly the importance of the hidden economy on economic theory and on the empirical

inflation and tax evasion an empirical analysis this paper contains an analysis of the effect of inflation on aggregate tax evasion in the united states over the period 1947 81 it is found that tax evasion in both absolute and relative terms is positively related to the inflation rate further the results indicate that aggregate evasion has risen in both absolute and relative terms with increases in the marginal tax rate but has fallen with increases in the detection probability the penalty rate and the wage share of income finally evasion has risen in absolute terms but has fallen in relative terms when real true income has risen

the informal sector in developed and less developed countries a literature survey the main goal of this study is two fold 1 to provide ageneral overview of the contributions to the literature on theinformal sector with a special focus on the public choiceapproach and 2 to compare these contributions across twoinstitutionally different types of countries developed andless developed developing and transition countries thepaper focuses on the criteria used to define the informalsector the relationship between the formal and informaleconomy tax evasion and public choice analysis it isstressed throughout this paper that the distinction betweenthe two types of countries is of key importance

does trade liberalization lead to environmental burden shifting in the global economy abstract does trade liberalization lead to the outsourcing of pollution from industrialized countries to developing countries according to the pollution haven hypothesis international trade is a key channel through which richer countries can geographically dissociate consumption from production of goods we examine whether and how trade liberalization via preferential trade agreements ptas facilitates the shifting of consumption based environmental burdens from developed countries via imports to poorer countries via exports based on panel data analysis of 183 countries from 1987 to 2013 we find partial evidence for trade induced environmental burden shifting while we observe an increase in footprint exports from low income countries when these countries liberalize trade this is not matched by an increase in footprint imports of high income countries our results also show that environmental clauses in ptas and participation in international environmental agreements do not influence the relationship between trade liberalization and ecological footprint movements however domestic institutions have a significant effect on the trade induced distribution of environmental burdens these findings suggest that ptas as a policy tool for trade liberalization are per se unlikely to induce exploitation of low income countries natural capital by wealthier nations however they suggest that political incentives inherent to democratic institutions encourage environmental burden shifting

false prophet or genuine savior assessing the effects of economic openness on sustainable development 1980 99 while many herald globalization the increasing interconnectedness of national economies to be associated with rising standards of living across the globe others fear its effects on sustainability antiglobalization forces and environ mentalists view these developments as a threat to the welfare of future generations because of profligate and excessive current consumption this study is the first to estimate the effects of dependence on trade foreign direct investment fdi and an index of economic freedom on the world bank s measure of sustainability the gen uine savings rate which measures the rate at which investment in the total stock of manufactured human and natural capital exceeds its depreciation contrary to pessi mists fears our indicators of economic openness show positive effects on sustain ability results that are robust to sample size testing procedure and several alternative specifications the results support those who suggest that distorted economies tend to be both inefficient and damaging to future generations if increasing trade fdi and economic freedom are hallmarks of globalization then worries about its effects on future well being are misplaced

individual morality and reputation costs as deterrents to tax evasion abstract empirical evidence suggests some taxpayers never evade evasion increases with the tax rate and evasion decisions are interdependent these findings are not easily explained by the existing theory which models evasion as an independently made amoral gamble this paper uses nonpecuniary costs of evasion to reconcile theory with evidence once individuals are assumed to differ by an honesty characteristic taxpayers dichotomise into groups the more honest of which responds to a tax change as the evidence suggests a further extension is to introduce an endogenous reputation cost this suggests a positive relationship between the number of evaders and the tax rate

on income tax avoidance the case of germany abstract we present a micro estimate determining taxed income as a function of gross income and all major deduction options depending on household and asset categories it shows that tax savings strongly increase with increasing income resulting in an effective marginal tax rate 16 percentage points below the legislated one for the highest income groups this calls into question the intended distributional impact of progressive income taxation our estimate suggests aggregate income tax losses to the german fiscal authorities in the order of magnitude of 34 of wage and income taxes paid in 1983 relative to 1994 tax proceeds this percentage would amount to dm 105 b

income tax evasion an intersectoral analysis abstract this paper develops an intersectoral model of income tax evasion with general equilibrium effects key elements of the model are imperfectly substitutable outputs from the compliant and evading sectors and workers with heterogeneous evasion costs the model allows for biased public expenditures a wide range of behavioural responses and both legitimate and criminal activities evading tax as well as tax avoidance activities qualitative and quantitative assessments are undertaken for the effects of tax rate changes on evasion activity relative output prices and real tax revenues this approach offers useful findings for taxation policy and is amenable to further analytical extensions

land leasing and local public finance in china s regional development evidence from prefecture level cities by analysing the evolution of local governments roles in different periods of china s growth in transition this paper explores local fiscal incentives to use subsidised land and infrastructure as key instruments in regional competition for manufacturing investment since the mid 1990s local land development behaviour is related to china s current land use institutions and intergovernmental arrangements on the basis of panel data covering prefectural level cities from 1999 to 2003 the paper empirically identifies and compares the fiscal impacts of different forms of land leasing by negotiation versus by auction tender policy implications are drawn from this analysis for the further reform of china s urban land system and fiscal institutions

variegated capitalism chinese style regional models multi scalar constructions zhang j and peck j variegated capitalism chinese style regional models multi scalar constructions regional studies the paper explores tensions between the varieties of capitalism framework and the heterogeneous particularities of the chinese case rather than forcing the chinese model into analytical boxes derived primarily from analyses of european and north american capitalism this complex formation more appropriately can be understood to exist in a triangular relationship with the two conventional poles of varieties scholarship the us style liberal market economy and the german style coordinated market economy furthermore the substantial degree of internal regional heterogeneity evident in the chinese case calls into question those models of capitalism that focus narrowly on institutional coherence at the national scale illustrating this point a range of sub models of chinese capitalism is examined regional styles of capitalist development that remain distinct from one another

income tax compliance in india an empirical analysis abstract aggregate data are used to study determinants of income tax revenues and taxpayer compliance in india during 1965 1966 to 1992 1993 the estimates show that both revenues collected and compliance were significantly affected by tax structure marginal tax rates and exemption limit in addition inflation as well as declining assessment intensity had a significant negative effect while traditional enforcement tools searches penalties and prosecution activity had only a limited effect best practice enforcement assessment and tax structure policies could have yielded at most a 90 revenue increase leaving india s income tax performance below the average of countries with similar gdp per capita thorough reform of tax administration is therefore needed to raise income tax collection in india to international standards

from hong kong s capitalist fundamentals to singapore s authoritarian governance the policy mobility of neo liberalising shenzhen china shenzhen special economic zone sez has been the flagship labouratory of deng xiaoping s reform and open door policy and the forerunner of china s capitalist transformation the initiation of the shenzhen sez was driven by the imperative of political and economic survival along the state hierarchy and was informed by the international practices of export processing zones epzs shenzhen s capitalist fundamentals such as the commodification of land and labour were largely established through imitating its big master hong kong across the border however shenzhen s policy learning style has gradually shifted from laissez faire hong kong to authoritarian singapore propelled by the aspiration shared among policy making party elites across china s administrative hierarchy of perpetuating the single party rule theoretically this paper demonstrates how policy mobility is shaped path dependently by the pre structured institutional ideological regime in what ways the idiosyncratic geographical historic

tax evasion inflation and stabilization abstract this paper focuses on the public resort to tax evasion in developing countries as an adjustment tactic during economic downturn we show using a theoretical model of intertemporal consumption that tax compliance declines when current income declines expectations about future income improve or inflation rises we then apply the model empirically to the cases of argentina brazil and chile three countries which have long experience with tax evasion and inflation over the last 40 years and find confirmation

income tax evasion labour supply and the equity efficiency tradeoff abstract this paper is an attempt to incorporate tax evasion into the analysis of optimum income taxation a model of variable labour supply with tax evasion is used to derive supply functions for labour in regular and irregular markets given taxpayer behaviour the government chooses tax rates penalties and the probability of detection to maximize a utilitarian social welfare function the results consist in the derivation of a formula for the optimum marginal tax rate and a characterization of the factors determining the choice between the penalty rate and the probability of detection as instruments for the control of tax evasion

predictive analytics and the targeting of audits the literature on audit strategies has focused on random audits or on audits conditioned only on income declaration in contrast tax authorities employ the tools of predictive analytics to identify taxpayers for audit with a range of variables used for conditioning the paper explores the compliance and revenue consequences of the use of predictive analytics in an agent based model that draws upon a behavioral approach to tax compliance the taxpayers in the model form subjective beliefs about the probability of audit from social interaction and are guided by a social custom that is developed from meeting other taxpayers the belief and social custom feed into the occupational choice between employment and two forms of self employment it is shown that the use of predictive analytics yields a significant increase in revenue over a random audit strategy

a dynamic portfolio choice model of tax evasion comparative statics of tax rates and its implication for economic growth abstract this paper extends the portfolio choice model of tax evasion from a static to a dynamic setting it is shown that while higher tax rates repress tax evasion in the static model they encourage tax evasion in the dynamic model we explore a novel implication of this result and show that while growth is decreasing in tax rates in the absence of tax evasion it is u shaped in tax rates in the presence of tax evasion

the economics of taxpayer compliance there is now a great deal of evidence suggesting that tax evasion is fairly widespread throughout european and north american economies estimates of the so called black economy indicate that perhaps 10 per cent of economic activity in these countries has been driven underground in the attempt to evade payment of tax for a detailed survey see pyle 1989 chs 2 4

escape from the usa government debt to gdp ratio country tax competitiveness and us oecd cross border m as statutory tax rates of a country do not reflect a country s true tax competitiveness we propose and show that government debt to gdp ratio govdebt of a country is a better proxy for its tax competitiveness using a comprehensive sample of 1 884 completed cross border acquisition transactions from the u s to other oecd countries we document that the u s target country govdebt difference is significantly and positively related to both deal announcement return and post deal tax saving of the acquirer the govdebt difference is also significantly and positively related to u s target country deal flow the findings remain robust when we control for the potential endogeneity of govdebt difference our findings strongly suggest that tax avoidance is an important driver of u s oecd cross border deal flow and it increases shareholder wealth for u s acquirers

measuring the average marginal tax rate from the individual income tax the economic effects of taxation depend on the configuration of marginal tax rates we consider here the appropriate measure of a marginal tax rate for the federal individual income tax which has a graduated rate structure and allows for numerous legal and illegal deductions from total income our conclusion is that the explicit marginal rate from the tax schedule is the right concept for many purposes hence we construct approximately weighted averages of these marginal tax rates for 1916 80 when weighted by adjusted gross income the arithmetic average of marginal tax rates is 5 in 1920 2 in 1930 6 in 1940 20 in 1950 23 in 1960 24 in 1970 and 30 in 1980 we also discuss the dispersion of marginal tax rates as well as the behavior of average tax rates and deductions from taxable income one noteworthy result concerns the fraction of adjusted gross income that accrues to families that face a marginal tax rate of at least 35 this fraction quadruples from 1964 to 1980 this abstract was borrowed from another version of this item

an econometric method of estimating the hidden economy united kingdom 1960 1984 estimates and tests in this paper a method of estimating the unrecorded part of the gnp based on a modified reset procedure applied to a currency demand equation is proposed the model passes all standard diagnostic tests and the estimates of the unrecorded economy provide plausible answers when used as a proxy for the tax evaded income the method is easily applicable to most countries with minor modifications copyright 1990 by royal economic society

a fairness approach to income tax evasion abstract the tax that a taxpayer wishes to evade is determined on the basis of his perception of the fairness of his fiscal treatment with respect to both governmental supply of public goods and the perceived behaviour of other taxpayers the coercive powers of the state and the taxpayer s attitude toward risk determine the extent to which this desired level is undertaken in practice this approach is able to produce implications for the relationship between public expenditure tax rates and tax evasion which are more consistent with empirical evidence than the results of the conventional portfolio choice approach