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Tax Complexity and Fiscal Illusion

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  • Heyndels, B
  • Smolders, C

Abstract

By using the Hirschman-Herfindahl index (HHC) the traditional approach to the tax complexity hypothesis introduces a restriction into the fiscal illusion model which has no theoretical foundation. The authors analyze the existing framework of the tax complexity hypothesis in detail and propose to capture this complexity through a Hannah and Kay index. They extend the theoretical framework by considering the expected return on investment in information. The empirical tests show that the HHC overestimates the importance of size inequalities between different taxes while underestimating the impact of the number of taxes as a source of informational costs. The expected revenue hypothesis is not supported. Copyright 1995 by Kluwer Academic Publishers

Suggested Citation

  • Heyndels, B & Smolders, C, 1995. "Tax Complexity and Fiscal Illusion," Public Choice, Springer, vol. 85(1-2), pages 127-141, October.
    • Handle: RePEc:kap:pubcho:v:85:y:1995:i:1-2:p:127-41
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    Citations

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    Cited by:

    1. Ashworth, John & Heyndels, Bruno, 2000. "A schema-theoretic approach to politicians' definitions of tax issues," Journal of Economic Psychology, Elsevier, vol. 21(1), pages 21-41, February.
    2. Yongzheng Liu & Haibo Feng, 2015. "Tax structure and corruption: cross-country evidence," Public Choice, Springer, vol. 162(1), pages 57-78, January.
    3. Rajul Awasthi & Nihal Bayraktar, 2015. "Can tax simplification help lower tax corruption?," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 297-330, December.
    4. Mark A. Moore & Aidan R. Vining, 2023. "PPP performance evaluation: the social welfare goal, principal–agent theory and political economy," Policy Sciences, Springer;Society of Policy Sciences, vol. 56(2), pages 267-299, June.
    5. Musharraf Rasool Cyan & Jorge Martinez-Vazquez & Violeta Vulovic, 2014. "New approaches to measuring tax effort," Chapters, in: Richard M. Bird & Jorge Martinez-Vazquez (ed.), Taxation and Development: The Weakest Link?, chapter 2, pages 27-68, Edward Elgar Publishing.
    6. Cherry, Todd L. & Kallbekken, Steffen & Kroll, Stephan, 2014. "The impact of trial runs on the acceptability of environmental taxes: Experimental evidence," Resource and Energy Economics, Elsevier, vol. 38(C), pages 84-95.
    7. Nihal Bayraktar, 2016. "Tax simplification and tax efficiency," EcoMod2016 9100, EcoMod.
    8. David Heres & Steffen Kallbekken & Ibon Galarraga, 2013. "Understanding Public Support for Externality-Correcting Taxes and Subsidies: A Lab Experiment," Working Papers 2013-04, BC3.
    9. Musharraf Cyan & Jorge Martinez-Vazquez & VIoleta Vulovic, 2013. "Measuring tax effort: Does the estimation approach matter and should effort be linked to expenditure goals?," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1308, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    10. Awasthi, Rajul & Bayraktar, Nihal, 2014. "Can tax simplification help lower tax corruption ?," Policy Research Working Paper Series 6988, The World Bank.
    11. David R. Heres & Steffen Kallbekken & Ibon Galarraga, 2017. "The Role of Budgetary Information in the Preference for Externality-Correcting Subsidies over Taxes: A Lab Experiment on Public Support," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(1), pages 1-15, January.
    12. Markus Diller & Markus Grottke & Georg Schneider, 2013. "Komplexität steuerrechtlicher Normen — Ein spieltheoretischer Erklärungsansatz," Schmalenbach Journal of Business Research, Springer, vol. 65(2), pages 110-135, March.
    13. Vining, Aidan R. & Moore, Mark A., 2017. "Potash ownership and extraction: Between a rock and a hard place in Saskatchewan," Resources Policy, Elsevier, vol. 54(C), pages 71-80.
    14. Roberto Dell’Anno & Paulo Mourao, 2012. "Fiscal Illusion around the World," Public Finance Review, , vol. 40(2), pages 270-299, March.

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