Tax Structure and Tax Compliance

James Alm (), Roy W. Bahl () and Matthew N. Murray ()

The Review of Economics and Statistics, 1990, vol. 72, issue 4, pages 603-13

Abstract: A model of individual tax compliance behavior, including evasion and avoidance, is developed and estimated. The model recognizes the importance of marginal income tax rates, payroll tax contributions and benefits, and the probability of detection and the penalty on unpaid taxes. Share equations for avoidance, evasion, and reported income are estimated using individual-level data. The estimation results indicate that the tax base rises with higher benefits for payroll tax contributions and falls with higher marginal tax rates; the base also falls with more severe penalties and more certain detection of evasion as individuals substitute towards avoidance income. Copyright 1990 by MIT Press.

Date: 1990
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