‘Flattening’ the Tax Evasion: Evidence from the Post-Communist Natural Experiment

Jan Hanousek, Tomáš Lichard and Karine Torosyan
Authors registered in the RePEc Author Service: Randall Filer

No 11229, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We analyze the response of tax evasion to the introduction of a flat tax in several transition economies. Using a novel estimator based on household level data, we show that in most of the studied countries there was no discernible effect on the measured size of unreported income following flat tax reform. This may imply that decreases in marginal tax rate may frequently have been accompanied by parallel deterioration in attitudes towards public services and these countries’ government in general as the only countries that show a response to the flat tax reform appear to be those where satisfaction with government services increased. Additionally, our results show a pro-cyclicality of the size of the shadow economy that is in line with previous research.

Keywords: Flat tax; Tax reform; Tax evasion; Underreporting; Consumption-income gap (search for similar items in EconPapers)
JEL-codes: C34 E26 H26 (search for similar items in EconPapers)
Date: 2016-04
New Economics Papers: this item is included in nep-eur, nep-iue, nep-pbe, nep-pke, nep-pub and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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