Tax Uncertainty and Welfare-Improving Tax Disputes

Nigar Hashimzade

No 10392, CESifo Working Paper Series from CESifo

Abstract: Tax law is often uncertain. In particular, the use of tax shelters tends to be in the “grey area” between illegal tax evasion and legal tax avoidance. In this paper I show that uncertainty in tax law can help achieve higher efficiency than allowing or disallowing a tax shelter with certainty. Furthermore, a tax dispute can lead to a net welfare gain despite the litigation costs. Thus, tax uncertainty and tax disputes can be socially desirable.

Keywords: tax uncertainty; tax shelter; tax avoidance; rent-seeking (search for similar items in EconPapers)
JEL-codes: D72 H26 K34 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-law, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10392

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