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Tax Progressivity and Tax Evasion

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  • Laszlo Goerke

Abstract

More progressive income taxes raise employment in models of imperfectly competitive labour markets. However, this prediction is not robust to modifications of the analytical structure. For example, in an efficiency wage setting, more progressive taxes reduce profits. This induces firms to exit the market such that the positive employment effect can vanish in a framework with a constant profit constraint. In this paper, it is demonstrated for an according model that tax evasion opportunities raise the likelihood of positive employment effects due to higher tax progressivity.

Suggested Citation

  • Laszlo Goerke, 2003. "Tax Progressivity and Tax Evasion," CESifo Working Paper Series 1097, CESifo.
    • Handle: RePEc:ces:ceswps:_1097
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp1097.pdf
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    References listed on IDEAS

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    13. repec:bla:ausecp:v:38:y:1999:i:2:p:131-42 is not listed on IDEAS
    14. Goerke, Laszlo, 1997. "An Open Shop, Wage Bargaining, and Taxation--A Note," Oxford Economic Papers, Oxford University Press, vol. 49(4), pages 651-657, October.
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    Cited by:

    1. Goerke, Laszlo, 2013. "Relative consumption and tax evasion," Journal of Economic Behavior & Organization, Elsevier, vol. 87(C), pages 52-65.
    2. Laszlo Goerke, 2015. "Income tax buyouts and income tax evasion," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(1), pages 120-143, February.
    3. Inna Cabelkova & Lubos Smutka, 2021. "The Effects of Solidarity, Income, and Reliance on the State on Personal Income Tax Preferences. The Case of the Czech Republic," Sustainability, MDPI, vol. 13(18), pages 1-22, September.
    4. repec:ebl:ecbull:v:8:y:2004:i:5:p:1-9 is not listed on IDEAS
    5. María Jesús Freire‐Serén & Judith Panadés, 2008. "Does Tax Evasion Modify the Redistributive Effect of Tax Progressivity?," The Economic Record, The Economic Society of Australia, vol. 84(267), pages 486-495, December.
    6. Gabriela S. Pantoja & Rodrigo S. Penaloza, 2014. "Tax evasion under behavioral structures," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 15(1), pages 30-40.
    7. Laszlo Goerke, 2014. "Tax Evasion by Individuals," IAAEU Discussion Papers 201409, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    8. Rainald Borck, 2004. "Income Tax Evasion and the Penalty Structure," Economics Bulletin, AccessEcon, vol. 8(5), pages 1-9.

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    Keywords

    efficiency wages; employment; income tax; tax evasion; tax progressivity;
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