Growth Effects of VAT Evasion and Enforcement

Chandler McClellan

Public Finance Review, 2019, vol. 47, issue 3, 530-557

Abstract: Lower tax revenues have a theoretically mixed effect on growth as they create more disposable income for investment but simultaneously reduce funds for public goods. This study combines firm-level data on tax evasion and enforcement from seventy-nine countries with macroeconomic data to examine the effects of tax enforcement measures and tax revenue shortfall on economic growth. This study finds that while increased enforcement measures reduce growth, high tax revenue collection serves to increase growth. These results suggest that reforms focusing on increasing revenue without resorting to greater enforcement measures are desirable.

Keywords: VAT; tax evasion; tax enforcement; economic growth (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:47:y:2019:i:3:p:530-557

DOI: 10.1177/1091142118783475

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