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Tax evasion and financial instability

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  • Peterson K. Ozili

Abstract

Purpose - The purpose of this paper is to explore the association between tax evasion and financial instability. The discussion also examines the effects of tax evasion for financial instability. Design/methodology/approach - This paper is an exploratory study on the effect of tax evasion on financial instability Findings - The paper shows that tax evasion can reduce the tax revenue available to governments to manage the economy and can weaken the government’s ability to promote stability in financial systems, whereas on the contrary, taxpayers who evade taxes feel they can use the evaded tax money to rather improve their own financial stability. Originality/value - This paper presents the first attempt to carefully examine the association between tax evasion and financial instability.

Suggested Citation

  • Peterson K. Ozili, 2020. "Tax evasion and financial instability," Journal of Financial Crime, Emerald Group Publishing Limited, vol. 27(2), pages 531-539, January.
    • Handle: RePEc:eme:jfcpps:jfc-04-2019-0051
    DOI: 10.1108/JFC-04-2019-0051
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    More about this item

    Keywords

    Financial crisis; Tax avoidance; Financial crime; Tax evasion; Financial stability; Government expenditure;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H27 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other Sources of Revenue

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