An OECD cross-country evidence on the tax evasion and tax rates relationship
Debi KONUKCU Önal and
Tarkan Çavuşoğlu ()
Additional contact information
Debi KONUKCU Önal: Hacettepe Üniversitesi
Iktisat Isletme ve Finans, 2015, vol. 30, issue 352, 31-54
The general presumption that tax evasion increases with tax rates has gained a different dimension in the literature with the seminal paper of Allingham and Sandmo (1972) and with the influential note written by Yitzhaki (1974). Both studies put forth that tax evasion may as well be decreasing with higher marginal tax rates under decreasing absolute risk aversion. This study investigates the relationship between tax rates and tax evasion through a cross-country analysis, based on a recently estimated size of tax evasion in OECD economies over the 2000-2010 period. Our panel data estimates imply an inverse relationship between the average income tax rate and evasion, whereas mixed results are obtained for the marginal tax rate with different estimation approaches. However, imposing a quadratic structure on estimations provide strong evidence on the presence of a critical tax rate above which the relationships between evasion and the tax rates are reversed for all estimations unanimously.
Keywords: Tax Evasion; Tax Rate; Laffer Curve; OECD; Panel Data. (search for similar items in EconPapers)
JEL-codes: C23 E62 H26 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:iif:iifjrn:v:30:y:2015:i:352:p:31-54
Ordering information: This journal article can be ordered from
http://www.iif.com.t ... ew/iif.2015.352.4373
Access Statistics for this article
Iktisat Isletme ve Finans is currently edited by Ali Bilge
More articles in Iktisat Isletme ve Finans from Bilgesel Yayincilik
Bibliographic data for series maintained by Ali Bilge ().