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Tolerance of tax evasion

Author

Listed:
  • Alvaro Forteza

    (Universidad de la República)

  • Cecilia Noboa

    (Universidad de la República)

Abstract

We present a formal model in which individuals want the government to tolerate tax evasion because, in a context of limited state capacity, evasion provides insurance. Also, preferred tolerance of tax evasion increases with income, because government programs are redistributive, and decreases with perceived state capacity, because taxation is less distortionary in more capable states. We test the model using a question in the World Values Survey (WVS) about how justifiable cheating on taxes is. We find that tax evasion justifiability views present an inverted-U shape in perceived risk and increase with individuals’ income.

Suggested Citation

  • Alvaro Forteza & Cecilia Noboa, 2021. "Tolerance of tax evasion," International Economics and Economic Policy, Springer, vol. 18(4), pages 767-786, October.
    • Handle: RePEc:kap:iecepo:v:18:y:2021:i:4:d:10.1007_s10368-021-00504-7
    DOI: 10.1007/s10368-021-00504-7
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