Tax evasion and deductible expenses

Amedeo Piolatto

MPRA Paper from University Library of Munich, Germany

Abstract: Public finance is strongly affected by tax evasion, which implies that public sector resources are very limited. Most of the analysis on how to fight tax evasion focused on the ways to deter evasion through incentives to people not to evade. This model has a different approach: instead of directly rewarding/punishing agents, it gives incentives to an agent to ensure that some other agents are obliged to declare their revenue. In particular, the idea is to give incentives to consumers (through itemised deductions) to declare their expenditure. This forces sellers to declare their earnings or, at least, it makes it more costly for them to convince buyers to buy on the black market. I show that under few conditions, for a given level of taxation, it is optimal to allow for partial itemised deductions.

Keywords: direct taxes; tax evasion; deductions (search for similar items in EconPapers)
JEL-codes: H00 H26 H30 (search for similar items in EconPapers)
Date: 2008-05, Revised 2008-07
New Economics Papers: this item is included in nep-pbe and nep-pub
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https://mpra.ub.uni-muenchen.de/10136/1/MPRA_paper_10136.pdf original version (application/pdf)

Related works:
Journal Article: Itemised Deductions: A Device to Reduce Tax Evasion (2015)
Working Paper: Itemised deductions: a device to reduce tax evasion (2014)
Working Paper: Itemised deductions: a device to reduce tax evasion (2010)
Working Paper: Itemised Deductions: A Device to Reduce Tax Evasion (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:10136

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