Optimal Taxes on Wealth and Consumption in the Presence of Tax Evasion
Johann Brunner (),
Susanne Pech () and
Paul Eckerstorfer ()
No 2010-03, NRN working papers from The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria
This article incorporates tax evasion into an optimum taxation framework with individuals differing in earning abilities and initial wealth. We find that despite the possibility of its evasion a tax on initial wealth should supplement the optimal nonlinear income tax, given a positive correlation between initial wealth and earning abilities. Further, even if income and initial wealth are taxed optimally, it is still desirable to levy a tax on commodities, though it can be evaded as well. Thus, our result provides a rationale for a comprehensive tax system. Optimal tax rates on commodities differ in general, however for the special case of a uniform evasion technology it turns out that equal rates are optimal if preferences are homothetic and weakly separable.
Keywords: Optimal Taxation; Tax Evasion (search for similar items in EconPapers)
JEL-codes: D82 H21 H24 H26 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-pub
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Journal Article: Optimal taxes on wealth and consumption in the presence of tax evasion (2013)
Working Paper: Optimal Taxes on Wealth and Consumption in the Presence of Tax Evasion (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:jku:nrnwps:2010_03
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