FACTORS AFFECTING TAX EVASION: DO INTEREST RATE AND REGIONAL EFFECTS MATTER?

Yi-Chung Hsu and Chien-Chiang Lee ()
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Yi-Chung Hsu: Department of Public Finance and Taxation, National Taichung University of Science & Technology, Taichung, Taiwan

The Singapore Economic Review (SER), 2016, vol. 61, issue 04, 1-23

Abstract: This paper empirically investigates the relationship among the tax evasion and local disposal income, unemployment rate and demographic variables by using 20 municipalities in Taiwan with the official interior, latest, and wider range of panel data over the period from 1998 to 2011. The main findings support the positive impact of disposal income on tax evasion, while unemployment rate has a negative impact. Among the interest rate effect models, if policy-makers want to hinder the extension of tax evasion, they should reduce the interest rate. Furthermore, government not only applies fiscal policy but also applies monetary policy for improving tax evasion. In our regional effect model, we have found evidence on a positive impact of the demographic structure variables on tax evasion except social expenditure of local government. We have also found clear evidence on the positive impact in South and East areas on tax evasion in the regional effect model. Moreover, both interest rate and regional factors have an influence on tax evasion.

Keywords: Tax evasion; regional effect; interest rate; panel data; Taiwan (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1142/S0217590815500265

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