Bypassing the Progressive Income Tax

This chapter analyses the distributive impacts of tax evasion on the Spanish income tax. It introduces a conceptual framework of tax compliance based on coercion, consent, and information, with reference to how these aspects evolved during late Francoism and the Transition period. It then presents estimations of income tax evasion, and of the slow generalisation process of the tax, during the dictatorship and after the transition tax reforms. It is shown that income tax evasion was inequitable: it was concentrated on the rich, and therefore decreased both progressivity and redistribution, as well as the potential for redistribution via spending. Because of this, Spain bypassed to some extent the classic progressive income tax with high rates and a comprehensive definition of income which had been central in other Western countries during the postwar period.