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Stricter Enforcement May Increase Tax Evasion

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  • Rainald Borck

Abstract

This paper shows that stricter enforcement may increase tax evasion. Individuals vote on a linear income tax which is used to finance lump sum transfers. Stricter enforcement may make redistributive taxation more attractive to the decisive voter. The tax rate and transfer may rise which in turn may increase tax evasion. An example shows that this result can actually occur. The paper also discusses the interaction between voting on taxes and the choice of audit rate by a budget maximizing bureaucrat.

Suggested Citation

  • Rainald Borck, 2002. "Stricter Enforcement May Increase Tax Evasion," Discussion Papers of DIW Berlin 297, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp297
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Traxler, Christian, 2010. "Social norms and conditional cooperative taxpayers," European Journal of Political Economy, Elsevier, vol. 26(1), pages 89-103, March.
    2. Leroux, Marie-Louise & Maldonado, Dario & Pestieau, Pierre, 2019. "The political economy of contributive pensions in developing countries," European Journal of Political Economy, Elsevier, vol. 58(C), pages 262-275.
    3. Besfamille, Martin & De Donder, Philippe & Lozachmeur, Jean-Marie, 2009. "The Political Economy of the (Weak) Enforcement of Sales Tax," CEPR Discussion Papers 7108, C.E.P.R. Discussion Papers.
    4. repec:ebl:ecbull:v:8:y:2004:i:5:p:1-9 is not listed on IDEAS
    5. Carlos Bethencourt & Lars Kunze, 2015. "The political economics of redistribution, inequality and tax avoidance," Public Choice, Springer, vol. 163(3), pages 267-287, June.
    6. Rainald Borck, 2004. "Income Tax Evasion and the Penalty Structure," Economics Bulletin, AccessEcon, vol. 8(5), pages 1-9.
    7. Alejandro Esteller-More, 2004. "Tax Evasion in Interrelated Taxes," Public Economics 0401001, University Library of Munich, Germany.
    8. Simonovits, András, 2010. "Adómorál és adórendszer [Tax morality and progressive wage tax]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 481-496.
    9. Rainald Borck, 2009. "Voting on redistribution with tax evasion," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 32(3), pages 439-454, March.
    10. Lago-Peñas, Ignacio & Lago-Peñas, Santiago, 2010. "The determinants of tax morale in comparative perspective: Evidence from European countries," European Journal of Political Economy, Elsevier, vol. 26(4), pages 441-453, December.
    11. Marie-Louise Leroux & Dario Maldonado & Pierre Pestieau, 2015. "Compliance, Informality and Contributive Pensions," CIRANO Working Papers 2015s-52, CIRANO.
    12. Mohammad Nurunnabi, 2018. "Tax evasion and religiosity in the Muslim world: the significance of Shariah regulation," Quality & Quantity: International Journal of Methodology, Springer, vol. 52(1), pages 371-394, January.
    13. Alejandro Esteller, 2004. "Tax Evasion in Interrelated Taxes," Working Papers 2004/2, Institut d'Economia de Barcelona (IEB).
    14. Marie-Louise Leroux & Dario Maldonado & Pierre Pestieau, 2015. "Contributive Pensions and Imperfect Tax Compliance: A Political Economy Model," CESifo Working Paper Series 5656, CESifo.
    15. Weinreich, Daniel, 2013. "Fair tax evasion and majority voting over redistributive taxation," MPRA Paper 48919, University Library of Munich, Germany.
    16. Sokolovskyi, Dmytro, 2018. "Game-theoretic model of tax evasion: analysis of agents’ interaction and optimization of tax burden," MPRA Paper 86415, University Library of Munich, Germany.

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    More about this item

    Keywords

    Tax evasion; enforcement; voting;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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