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Tax Evasion, Tax Administration, and the Impact of Growth: Tax Enforcement as Regulatory Failure in a High Tax Rates, High Tax Evasion, and Low-Growth Economic Environment

In: Taxation in Crisis

Author

Listed:
  • Yiolanda Vasilopoulou

    (University of Peloponnese)

  • Dimitrios D. Thomakos

    (University of Peloponnese)

Abstract

In this chapter, we provide an overview on the interlinked problems of high tax rates, tax evasion, tax havens, global tax competition, the enforcement costs of a tax system, and their relationship with economic growth. Reviewing the related literature, it becomes clear that the current state of high tax evasion and high tax rates are detrimental to both the workings of the tax system and economic growth. There is a clear regulatory failure in attempting to battle tax evasion with either higher tax rates or higher enforcement costs—a conclusion that is supported by empirical data from several OECD countries. In addressing this problem, our review and empirical analysis clearly points toward a solution that is based in providing appropriate motives for taxpayers to pay their taxes while not distorting their plans for economic activity. Optimal allocation of resources in an environment of low economic growth and fiscal restraint can easily be achieved by lowering tax rates—it is then, and only then, that other issues of public policy such as equity and redistribution considerations can be meaningfully discussed.

Suggested Citation

  • Yiolanda Vasilopoulou & Dimitrios D. Thomakos, 2017. "Tax Evasion, Tax Administration, and the Impact of Growth: Tax Enforcement as Regulatory Failure in a High Tax Rates, High Tax Evasion, and Low-Growth Economic Environment," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Dimitrios D. Thomakos & Konstantinos I. Nikolopoulos (ed.), Taxation in Crisis, chapter 8, pages 175-203, Palgrave Macmillan.
  • Handle: RePEc:pal:pmschp:978-3-319-65310-5_8
    DOI: 10.1007/978-3-319-65310-5_8
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    Cited by:

    1. Karen Tumanyants, 2018. "Economic impact of the change in tax rate on small enterprises of manufacturing and construction sectors: Evidence from Russia 2006-2014," Business and Economic Horizons (BEH), Prague Development Center, vol. 14(3), pages 642-658, June.
    2. Bethencourt, Carlos & Kunze, Lars, 2020. "Social norms and economic growth in a model with labor and capital income tax evasion," Economic Modelling, Elsevier, vol. 86(C), pages 170-182.
    3. Leonardo Barros Torres & Gilberto Tadeu Lima & Jaylson Jair da Silveira, 2024. "Endogenous Tax Compliance and Macroeconomic Performance Driven by Satisficing Evolutionary Dynamics," Working Papers, Department of Economics 2024_10, University of São Paulo (FEA-USP).

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