Optimal taxes on wealth and consumption in the presence of tax evasion

Johann Brunner (), Paul Eckerstorfer and Susanne Pech

Journal of Economics, 2013, vol. 110, issue 2, 107-124

Abstract: This article incorporates tax evasion into an optimum taxation framework with individuals differing in earning abilities and initial wealth. We find that despite the possibility of its evasion a tax on initial wealth should supplement the optimal nonlinear income tax, given a positive correlation between initial wealth and earning abilities. Further, even if income and initial wealth are taxed optimally, it is still desirable to levy a tax on commodities, though it can be evaded as well. Thus, our result provides a rationale for a comprehensive tax system. Optimal tax rates on commodities differ in general, however for the special case of a uniform evasion technology equal rates are optimal if preferences are homothetic and weakly separable. Copyright Springer-Verlag Wien 2013

Keywords: Optimal taxation; Tax evasion; Initial wealth; D82; H21; H24; H26 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Optimal Taxes on Wealth and Consumption in the Presence of Tax Evasion (2010)
Working Paper: Optimal Taxes on Wealth and Consumption in the Presence of Tax Evasion (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:110:y:2013:i:2:p:107-124

DOI: 10.1007/s00712-012-0314-4

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