Tax Evasion, Risky Laundering, and Optimal Deterrence Policy

Gideon Yaniv

International Tax and Public Finance, 1999, vol. 6, issue 1, 27-38

Abstract: This paper extends the Allingham and Sandmo's (1972) model of income tax evasion to take account of laundering opportunities, allowing the taxpayer to determine not only the amount of actual income to declare but also the amount of undeclared income to launder. Laundering, aside of entailing direct costs, is assumed to be an unlawful activity, subject to the risk of detection and punishment. The tax authorities devote separate resource efforts to initial audits which may detect undeclared income that has not been laundered and to in-depth investigation which may detect undeclared income that has been laundered. The paper analyzes the effects of laundering incentives on evasion and derives guidelines for the optimal design of a joint evasion/laundering deterrence policy. Copyright Kluwer Academic Publishers 1999

Keywords: Tax Evasion; Money Laundering; Net Worth Method; Optimal Deterrence (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (12)

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DOI: 10.1023/A:1008643703122

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