Multiple Modes of Tax Evasion: Theory and Evidence from the TCMP

Jorge Martinez-Vazquez () and Mark Rider

International Center for Public Policy Working Paper Series, at AYSPS, GSU from International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University

Abstract: In general, theoretical and empirical studies of tax compliance conclude that increasing penalties and detection probabilities increase compliance. However, these conclusions are based on relatively simple models with a single mode of tax evasion. In this paper, we examine the theoretical and empirical implications of accounting for multiple modes of tax evasion. We find that an increase in enforcement effort in one mode has an ambiguous effect on compliance in the targeted mode as well as the other mode. In order to gain greater insight into taxpayer behavior, we use the 1985 TCMP to estimate an empirical model with two modes of evasion: income reporting and deductions reporting compliance. We find that taxpayers use alternative modes of evasion as substitutes. In other words, an increase in enforcement effort in a given mode leads to an increase in compliance in the targeted mode and a decrease in compliance in the other mode. We use our empirical estimates of the parameters in the model to conduct several simulations. We find that the net revenue effect of increased enforcement effort is positive.

Keywords: Tax; Tax Evasion; Tax Theory; Tax Evidence (search for similar items in EconPapers)
Pages: 50 pages
Date: 2003-03-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://icepp.gsu.edu/files/2015/03/ispwp0306.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ays:ispwps:paper0306

Access Statistics for this paper

More papers in International Center for Public Policy Working Paper Series, at AYSPS, GSU from International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University Contact information at EDIRC.
Bibliographic data for series maintained by Paul Benson ().