Bypassing progressive taxation: fraud and base erosion in the Spanish income tax (1970-2001)

Sara Torregrosa-Hetland

No 2015/31, Working Papers from Institut d'Economia de Barcelona (IEB)

Abstract: In this paper I estimate under-assessment of incomes in the Personal Income Tax during the years following its introduction in Spain. The methodology combines an analysis of discrepancy with National Accounts and an econometric exercise, which follows and slightly modifies the Feldman and Slemrod (2007) procedure, based on the relation of reported charitable donations with the composition of income in tax micro-data. Both calculations show that concealment of income differed substantially across sources and levels, with better compliance at the bottom of the distribution of taxpayers. Because of this, fraud made the tax less progressive than it was on paper. Compliance improved over the next decades, but the overall levels were still far from those attained in developed countries, because of lack of administrative capacity or political will to enforce the new regulation. In this way, general, comprehensive income taxation was hardly a reality 20 years after its introduction.

Keywords: Tax evasion; base erosion; under-reporting; progressivity; personal income tax (search for similar items in EconPapers)
JEL-codes: H23 H24 H26 N44 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2015
New Economics Papers: this item is included in nep-his, nep-iue, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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