The Effects of the Interaction between Direct and Indirect Tax Evasion: The Cases of VAT and RST
Public Finance = Finances publiques, 1998, vol. 53, issue 3-4, 385-418
Value added tax (VAT) and retail sales tax (RST) are economically equivalent tax alternatives on consumption expenditure. This paper shows that, if indirect taxation is joined to direct taxation, with unethical agents, the equivalence in terms of government's revenues does not hold. We consider a model where, under both the VAT and RST regimes, the decisions on tax evasion result from a Nash-bargaining process involving all agents in the market. In either case, the tax authority refers to a generalised invoice-system for registered traders' income tax-base determination purposes. We analyse the chain of reported transactions and show that the technical differences between VAT and RST generate different amounts of direct and indirect tax evasion. It turns out that under RST the actual government revenues are lower than under VAT.
References: Add references at CitEc
Citations View citations in EconPapers (1) 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:pfi:pubfin:v:53:y:1998:i:3-4:p:385-418
Access Statistics for this article
More articles in Public Finance = Finances publiques
Series data maintained by Christopher F. Baum ().