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on Public Finance |
| By: | Per Engström; Bertil Holmlund |
| Abstract: | Self-employed individuals have arguably greater opportunities than wage earners to underreport their incomes. The incentives for underreporting should be especially strong in an economy with generally high taxes. This paper uses recent income and expenditure data to examine the extent of underreporting of income among self-employed individuals in Sweden. A key hypothesis is that underreporting of incomes among the self-employed would be visible in the data as “excess food consumption”, for a given level of observed income. Our results confirm the underreporting hypothesis. In particular, we estimate that households with at least one self-employed member underreport their total incomes by around 30 percent. Underreporting appears to be twice as prevalent among self-employed people with unincorporated businesses as among those with incorporated businesses. |
| Keywords: | tax evasion, self-employment, Engel curves |
| JEL: | D12 H24 H25 H26 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1736&r=pub |
| By: | Alessandro Balestrino |
| Abstract: | We present a model of income tax avoidance with heterogeneous agents, assuming the presence of a comparison income effect and of a psychic cost (disutility) of tax dodging. We analyse the policy preferences of the agents, and identify a median-voter political equilibrium. Paralleling previous results in the optimal taxation literature, we show that the comparison income effect calls for a high degree of progressivity of the income tax; additionally, we find that this tendence is strengthened by the psychic cost of avoidance. We then model the endogenous formation of the stigma attached to the act of avoidance as a "conformism game". We argue that such stigma is motivated by the desire to make redistribution more effective, and that it is enhanced by the income comparison effect. |
| Keywords: | tax avoidance, social norms, conformism, comparison income, median voter |
| JEL: | D72 H26 H31 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1758&r=pub |
| By: | Howell H. Zee |
| Abstract: | This paper proposes a new hybrid cash-flow tax on corporations that, on one hand, taxes only excess corporate profits as they accrue, and, on the other hand, treats real and financial transactions neutrally. It is, therefore, a superior tax compared to the cash-flow tax on real transactions that seems to have gained common acceptance. The hybrid tax is a modified version of the cash-flow tax on real and financial transactions combined. The modification involves replacing expensing of fixed assets with normal depreciation allowances, but the undepreciated value of fixed assets is carried forward with interest at the opportunity cost of equity capital. |
| Date: | 2006–05–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/117&r=pub |
| By: | Hélène Poirson |
| Abstract: | This paper assesses the effects of India's tax system on growth, through the level and productivity of private investment. Comparison of India's indicators of effective tax rates and tax revenue productivity with other countries shows that the Indian tax system is characterized by: (1) a high dependence on indirect taxes, (2) low average effective tax rates and tax productivity, and (3) high marginal effective tax rates and large tax-induced distortions on investment and financing decisions. The paper finds that the most recently proposed package of reforms would improve tax productivity and lower the marginal tax burden and tax-induced distortions. But firms that rely on internal sources of funds or face problems borrowing would continue to face high marginal tax rates. |
| Keywords: | Economic growth , India , Tax policy , Tax reforms , Indirect taxation , Tax rates , |
| Date: | 2006–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/93&r=pub |
| By: | Joshua S. Gans; Andrew Leigh |
| Abstract: | In 1979, Australia abolished federal inheritance taxes. Using daily deaths data, we show that approximately 50 deaths were shifted from the week before the abolition to the week after (amounting to over half of those who would have been eligible to pay the tax). Our results imply that over the very short run, the death rate is highly elastic with respect to the inheritance tax rate. |
| Keywords: | behavioural responses to taxation, timing of deaths, estate tax |
| JEL: | H26 I12 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:auu:dpaper:530&r=pub |