nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2021‒05‒10
five papers chosen by

  1. Technical Appendix: “Income Tax Evasion: Tax Elasticity, Welfare, and Revenue†By Max Gillman
  2. Tax Evasion at the Top of the Income Distribution: Theory and Evidence By Guyton, John; Langetieg, Patrick; Reck, Daniel; Risch, Max; Zucman, Gabriel
  3. SIVAR - simulador para la evaluación del impuesto al valor agregado y sus reformas en Colombia By Javier à vila-Mahecha
  4. Land is back, it should be taxed, it can be taxed By Bonnet, Odran; Chapelle, Guillaume; Trannoy, Alain; Wasmer, Etienne
  5. Accounting for the Great Divergence: Recent Findings from Historical National Accounting By Broadberry, Stephen N

  1. By: Max Gillman (Department of Economics, University of Missouri-St. Louis)
    Abstract: A technical appendix for “Income Tax Evasion: Tax Elasticity, Welfare, and Revenue.†This paper provides a general equilibrium model of income tax evasion. As functions of the share of income reported, the paper contributes an analytic derivation of the tax elasticity of taxable income, the welfare cost of the tax, and government revenue as a percent of output. It shows how an increase in the tax rate causes the tax elasticity and welfare cost to increase in magnitude by more than with zero evasion. Keeping constant the ratio of income tax revenue to output, as shown to be consistent with certain US evidence, a rising productivity of the goods sector induces less evasion and thereby allows tax rate reduction. The paper derives conditions for a stable share of income tax revenue in output with dependence upon the tax elasticity of reporting income. Examples are provided with less and more productive economies in terms of tax elasticity of reported income, the welfare cost of taxation and the tax revenue as a percent of output, with sensitivity analysis with respect to leisure preference and goods productivity. Discussion focuses on how the tax evasion analysis may help explain such fiscal tax policy as the postwar US income tax rate reductions with discussion of tax acts and government fiscal multipliers. Fiscal policy with tax evasion included shows how tax rate reduction induces less tax evasion, a lower welfare cost of taxation, and makes for a stable income tax share of output.
    Keywords: income tax evasion, tax elasticity, welfare, tax revenue
    JEL: E13 H21 H26 H30 H68 K34 K42 O11
    Date: 2020–09
  2. By: Guyton, John; Langetieg, Patrick; Reck, Daniel; Risch, Max; Zucman, Gabriel
    Abstract: This paper studies tax evasion at the top of the U.S. income distribution using IRS micro-data from (i) random audits, (ii) targeted enforcement activities, and (iii) operational audits. Drawing on this unique combination of data, we demonstrate empirically that random audits underestimate tax evasion at the top of the income distribution. Specifically, random audits do not capture most tax evasion through offshore accounts and pass-through businesses, both of which are quantitatively important at the top. We provide a theoretical explanation for this phenomenon, and we construct new estimates of the size and distribution of tax noncompliance in the United States. In our model, individuals can adopt a technology that would better conceal evasion at some fixed cost. Risk preferences and relatively high audit rates at the top drive the adoption of such sophisticated evasion technologies by high-income individuals. Consequently, random audits, which do not detect most sophisticated evasion, underestimate top tax evasion. After correcting for this bias, we find that unreported income as a fraction of true income rises from 7% in the bottom 50% to more than 20% in the top 1%, of which 6 percentage points correspond to undetected sophisticated evasion. Accounting for tax evasion increases the top 1% fiscal income share significantly.
    Keywords: inequality; tax evasion; tax gap
    JEL: D63 H26
    Date: 2021–02
  3. By: Javier à vila-Mahecha
    Abstract: Este documento es una guía para el usuario de SIVAR, un simulador de acceso abierto basado en información pública, que replica las características fundamentales del impuesto al valor agregado en Colombia, de acuerdo con las condiciones establecidas en la ley 2010 de 2019. El simulador permite estimar algunos efectos del IVA tales como recaudo potencial, tasa de evasión, cobertura de la base gravable, progresividad y productividad del impuesto, valor de la compensación del IVA, impacto en el IPC, incidencia distributiva por deciles de ingreso y sexo del jefe de hogar. Mediante el desarrollo de esta herramienta, el centro de Investigaciones para el Desarrollo de la Universidad Nacional de Colombia pretende contribuir al análisis y discusión de la estructura del IVA, sus reformas e implicaciones financieras y distributivas. *** This document is a guide for SIVAR users, an open access simulator based on public information, which replicates the fundamental characteristics of value added tax in Colombia, in accordance with the conditions established in the 2010 law of 2019. The simulator allows estimating some VAT effects such as potential collection, evasion rate, tax base coverage, progressivity and productivity, value of VAT compensation, impact on the CPI, distributional incidence by income deciles and gender of household head. By means the development of this tool, the Center for Development Research at National University of Colombia intends to contribute to the analysis and discussion of the VAT structure, its reforms, and financial and distributional implications.
    Keywords: IVA, progresividad, reforma tributaria, simulador
    JEL: D63 E62 H22 H26
    Date: 2021–04–22
  4. By: Bonnet, Odran; Chapelle, Guillaume; Trannoy, Alain; Wasmer, Etienne
    Abstract: Land is back. The increase in wealth in the second half of 20th century arose from housing and land. It should be taxed. We introduce land and housing structures in Judd's standard setup: first best optimal taxation is achieved with a property tax on land and requires no tax on capital. With positive taxes on housing rents, a first best is still possible but with subsidies to rental housing investments, and either with differential land tax rates or with a tax on imputed rents. It can be taxed. Even absent land taxes, one can tax it indirectly and reach a Ramsey-second best still with no tax on capital and positive housing rent taxes in the steady-state. This result extends to the dynamics under restrictions on parameters.
    Keywords: Capital; First best; housing; land; Optimal tax; Second best; wealth
    JEL: D63 R14
    Date: 2021–02
  5. By: Broadberry, Stephen N
    Abstract: As a result of recent work on historical national accounting, it is now possible to establish more firmly the timing of the Great Divergence of living standards between Europe and Asia in the eighteenth century. There was a European Little Divergence as Britain and the Netherlands overtook Italy and Spain, and an Asian Little Divergence as Japan overtook China and India. The Great Divergence occurred because Japan grew more slowly than Britain and the Netherlands starting from a lower level, and because of a strong negative growth trend in Qing dynasty China. A growth accounting framework is used to assess the contributions of labour, human and physical capital, land and total factor productivity. In addition to these proximate sources, the roles of institutions and geography are examined as the ultimate sources of the divergent growth patterns.
    Keywords: explanation; Great Divergence; living standards; Measurement
    JEL: N10 N30 N35 O10 O57
    Date: 2021–03

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