nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2015‒07‒04
two papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Income underreporting based on income expenditure gaps: survey vs tax records By Paulus, Alari
  2. Taxing the Rich By Augustin Landier; Guillaume Plantin

  1. By: Paulus, Alari
    Abstract: We estimate the extent of income underreporting among working households, using data from an income survey linked with individual tax records for Estonia. Income underreporting is inferred from consumption propensities, following and extending the method by Pissarides andWeber (1989). Our dataset allows us to assess the validity of the key assumption in related studies that survey income corresponds to income reported to the tax authority. Our results show large underreporting of earnings by the self-employed and also substantial underreporting of earnings by private sector employees on the basis of register income, while a much smaller scale of non-compliance is detected for self-employed and no underreporting for private employees using survey incomes. This suggests that previous studies applying this methodology to survey data have underestimated the extent of non-compliance.
    Date: 2015–06–22
  2. By: Augustin Landier (Toulouse School of Economics (TSE)); Guillaume Plantin (Université Toulouse 1 Capitole)
    Abstract: Affluent households can respond to taxation with means that are not economically viable for the rest of the population, such as sophisticated tax plans and international tax arbitrage. This paper studies an economy in which an inequality-averse social planner faces agents who have access to a tax-avoidance technology with increasing returns to scale, and who can shape the risk profile of their income as they see fit. Scale economies in avoidance imply that optimal taxation is regressive at the top. This in turn may trigger excessive risk taking.
    Keywords: Taxation; Theoretical framework; Tax-avoidance
    Date: 2013–09

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