The Mill Hypothesis Examination on the EU Sample

Lenka Malicka

Montenegrin Journal of Economics, 2021, vol. 17, issue 2, 47-58

Abstract: In this paper, the examination of the specific type of fiscal illusion, known as Mill hypothesis, is provided. The source of this type of fiscal illusion originates in tax invisibility, when in comparison with direct taxes, indirect taxes are less visible to taxpayers. Feeding the fiscal illusion through the increase of tax rates of invisible taxes, governments are able to increase their expenditure. The relationship between taxes differing in their visibility and government expenditure is estimated on the sample of EU 28 countries in the period of 1995–2017. Estimated dynamic panel models using the GMM system estimator employ different groups of taxes imposed on taxpayers (indirect, direct, invisible and visible).

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:mje:mjejnl:v:17:y:2021:i:2:47-58

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