On the Relation between Tax Rates and Evasion in a Multi-period Economy

Jordi Caballe () and Judith Panad?
Authors registered in the RePEc Author Service: Judith Panadés ()

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: We extend the basic tax evasion model to a multi-period economy exhibiting sustained growth. When individuals conceal part of their true income from the tax authority, they face the risk of being audited and hence of paying the corresponding fine. Both taxes and fines determine individual saving and the rate of capital accumulation. In this context we show that the sign of the relation between the level of the tax rate and the amount of evaded income is the same as that obtained in static setups. Moreover, high tax rates on income are typically associated with low growth rates as occurs in standard growth models that disregard the tax evasion phenomenon.

Keywords: Tax Evasion; Growth (search for similar items in EconPapers)
JEL-codes: E62 H26 O41 (search for similar items in EconPapers)
Pages: 12
Date: 2001-10-23
New Economics Papers: this item is included in nep-ent, nep-net, nep-pbe and nep-pub
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:aub:autbar:500.01

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