A Collateral Tax Sanction: When Does it Mimic a Welfare-Improving Tag?

Yulia Kuchumova (uparamonova@hse.ru)
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Yulia Kuchumova: National Research University Higher School of Economics

HSE Working papers from National Research University Higher School of Economics

Abstract: The suspension of a driver's license, the revocation of a passport or a professional license are used by the tax authorities as sanctions for failure to comply with tax obligations and are referred to as collateral tax sanctions. In this paper, I propose a new rationale for why it may be bene cial to use collateral tax sanctions for the purpose of tax enforcement. By affecting consumption and providing enforcement targeted to a group, collateral tax sanctions may allow the government to impose punishment correlated with an individual's earning potential. Such punishment also makes the effective tax rates correlated with an individuals' earning potential and therefore leads to a more effective redistribution of income. I show that the use of collateral tax sanctions could increase the CES social welfare function when the skill distribution of the targeted group rst-order stochastically dominates the skill distribution of the other group and the social welfare function is sufficiently concave.

Keywords: collateral sanction; tax enforcement; ability; tag (search for similar items in EconPapers)
JEL-codes: Z (search for similar items in EconPapers)
Pages: 32 pages
Date: 2017
New Economics Papers: this item is included in nep-iue, nep-law and nep-pbe
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Published in WP BRP Series: Economics / EC, November 2017, pages 1-32

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Persistent link: https://EconPapers.repec.org/RePEc:hig:wpaper:181/ec/2017

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