Tax Evasion and Growth: a Banking Approach

Max Gillman and Michal Kejak ()

No 806, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: The paper formalizes the relation between flat taxes and growth when there is a competitive equilibrium tax evasion. A decentralized tax evasion service is supplied by the banking sector. The bank production function follows the financial intermediation microfoundation approach, with deposits as an input. Across a class of endogenous growth models, tax evasion decreases the effective tax rate, and thereby lessens the negative effect of taxes on growth. And as the tax rate rises, tax evasion causes the growth rate to fall by less. Underlying the results is a fiscal principle whereby tax evasion creates, or magnifies, a rising demand price sensitivity to higher tax rates.

Keywords: Tax evasion; financial intermediation; endogenous growth; and flat taxes. (search for similar items in EconPapers)
JEL-codes: E13 E62 H26 O41 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2008-06
New Economics Papers: this item is included in nep-acc, nep-ban, nep-fdg, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://econ.core.hu/file/download/mtdp/MTDP0806.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to econ.core.hu:80 (A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.)

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:has:discpr:0806

Access Statistics for this paper

More papers in CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies Contact information at EDIRC.
Bibliographic data for series maintained by Nora Horvath ( this e-mail address is bad, please contact ).