Does More Progressive Tax Make Tax Discipline Weaker?

Tatiana Damjanovic ()

No 506, CRIEFF Discussion Papers from Centre for Research into Industry, Enterprise, Finance and the Firm

Abstract: This paper investigates the relationship between the disparity in tax base and tax collection. I address the tax collection problem with traditional industrial organization approach. Thus, I model the "tax minimization" industry where the supplier helps taxpayers to avoid their tax liability. I find that lower income inequality as well as a less progressive tax code may result in a smaller number of tax payers committing to their tax duties. Finally, I question the reduction in the highest tax rate as a policy directed at the improvement of tax discipline.

Keywords: Endogenous prices; tax collection; inequality; tax progressivity. (search for similar items in EconPapers)
JEL-codes: H21 H23 H26 (search for similar items in EconPapers)
Date: 2005-02
New Economics Papers: this item is included in nep-pbe and nep-pub
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