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Can Tax Reform Work in an Economy Where Tax Avoidance and Evasion are Endemic?

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  • Edimon Ginting

Abstract

In this model firms seek to minimise their tax liabilities by purchasing rent-seeking services from a provider who also sells legitimate public services to the government. The provider enjoys economies of scope - its two outputs are produced jointly. Tax reform in this setting can increase both government revenue and the efficiency of the economy because a type of Laffer curve is operational and because such reform can lead to resources being moved out of rent-seeking activity. Later this partial equilibrium framework will be embedded within a conventional general equilibrium model.

Suggested Citation

  • Edimon Ginting, 1998. "Can Tax Reform Work in an Economy Where Tax Avoidance and Evasion are Endemic?," Centre of Policy Studies/IMPACT Centre Working Papers ip-71, Victoria University, Centre of Policy Studies/IMPACT Centre.
    • Handle: RePEc:cop:wpaper:ip-71
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    References listed on IDEAS

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    2. Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-373, August.
    3. Fullerton, Don, 1982. "On the possibility of an inverse relationship between tax rates and government revenues," Journal of Public Economics, Elsevier, vol. 19(1), pages 3-22, October.
    4. Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October.
    5. Bhagwati, Jagdish N., 1980. "Lobbying and welfare," Journal of Public Economics, Elsevier, vol. 14(3), pages 355-363, December.
    6. Brennan,Geoffrey & Buchanan,James M., 2006. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521027922, October.
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    More about this item

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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