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Productivity and Tax Evasion

Era Dabla-Norris, Mark Gradstein, Fedor Miryugin and Florian Misch

No 8002, CESifo Working Paper Series from CESifo

Abstract: The extent of tax compliance has important implications for revenue yield, efficiency and the fairness of any tax system. Tax evasion undermines revenue collection, distorts competition, and undermines a country’s development prospects. In this paper, we investigate whether higher productivity causally leads to lower tax evasion. We first present stylized facts consistent with this view and develop a model that illustrates one potential transmission channel. Second, we test the model predictions at the firm level using the self-reported share of declared income as proxy for tax evasion for a large sample of emerging and developing economies. Our results suggests that productivity improvements by firms can lead to lower tax evasion.

Keywords: economic development; firm productivity; tax evasion (search for similar items in EconPapers)
JEL-codes: D20 H26 O47 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-eff, nep-iue and nep-pbe
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