The Distributional Component of the Price of the Tax Avoidance Service

Tatiana Damjanovic ()

No 454, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: The traditional avoidance literature undeservedly neglects tax base distribution as a factor affecting the avoidance price, and generally assumed to be equal to the avoidance cost. In reality, avoidance providers are usually either high-skilled specialists or insiders. The strong collusion thus, naturally seems to be an assumption of the behavior of avoidance providers. Within such a framework, income distribution, which forms an avoidance demand together with tax codes, plays a very essential roll for the outcome of both avoidance price and quantity. My article models an economy with a monopolistic avoidance provider and imperfect information, and illustrates possible consequences of tax base changes. The paper examines the relationship between inequality and a government's ability to collect tax revenue, and also considers the possible outcome of a tax base broadening. Furthermore, it provides an additional explanation for the secession decision.

Keywords: Tax avoidance; optimal taxation; income distribution; endogenous prices; inequality; tax base broadening; secession. (search for similar items in EconPapers)
JEL-codes: C72 D31 D42 D43 D69 D82 E61 E65 F15 G28 G29 H21 H24 H25 H31 H32 J61 K34 L12 O17 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2001-07-05, Revised 2001-12-03
New Economics Papers: this item is included in nep-law
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Citations: View citations in EconPapers (3)

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