The tax rebate trade-off

Salvatore Ciucci
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Salvatore Ciucci: Dipartimento di Economia, Università degli Studi della Campania “Luigi Vanvitelli”

No 2025.26, Working Papers from Fondazione Eni Enrico Mattei

Abstract: This study extends the theory of tax evasion by presenting a model of collaborative tax evasion between buyers and sellers. Buyers differ only in their level of tax morale, and tax evasion occurs when the seller fails to issue a receipt for the transaction. To counteract this, the government can disrupt the collusion between sellers and buyers by offering a tax rebate to buyers who request and retain the transaction receipt. The theoretical findings show that the tax rebate introduces a policy trade-off for the government between aggregate quantity and tax revenue. Furthermore, the marginal effect of the rebate on aggregate quantity, tax revenue, and social welfare is ambiguous. This study provides a theoretical foundation for understanding and managing the economic inefficiencies that may arise from tax rebate policies.

Keywords: Tax rebate; cooperative tax evasion; tax morale (search for similar items in EconPapers)
JEL-codes: H00 H20 H26 H30 (search for similar items in EconPapers)
Date: 2025-11
New Economics Papers: this item is included in nep-acc, nep-iue, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2025.26

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