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Tax Rates and Tax Evasion: An Empirical Analysis of the Structural Aspects and Long-Run Characteristics in Italy

Author

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  • Chiarini, Bruno

    (University of Naples Parthenope)

  • Marzano, Elisabetta

    (University of Naples Parthenope)

  • Schneider, Friedrich

    (University of Linz)

Abstract

By using official time series of the Italian evaded VAT base (Ministry of Finance) for the period 1980-2004 we investigate empirically the long-run characteristics of tax evasion and the relationship with the tax burden. We focus on three important issues not analyzed so far. First, using different measures of aggregate economic activity as reference variables in estimating the average tax burden, we investigate the size and dynamics of the over-burden traceable back to tax evasion. Second, exploiting cointegration techniques, we quantify the elasticity between tax evasion and the average tax rate in Italy. We then comment on the complex dynamic interaction between tax burden and tax evasion, to ascertain whether in the Italian experience there is evidence for any “vicious circle” between them.

Suggested Citation

  • Chiarini, Bruno & Marzano, Elisabetta & Schneider, Friedrich, 2008. "Tax Rates and Tax Evasion: An Empirical Analysis of the Structural Aspects and Long-Run Characteristics in Italy," IZA Discussion Papers 3447, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp3447
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    Cited by:

    1. Wajdi Affes, 2020. "The Impact of Tax Rates On Tax Evasion: A Macroeconomic Study," Journal of Accounting and Management Information Systems, Faculty of Accounting and Management Information Systems, The Bucharest University of Economic Studies, vol. 19(2), pages 252-282, June.
    2. Eliška Čejková & Hana Zídková, 2019. "The Impact of Specific Reverse Charge on Waste and Scrap on Tax Revenues in the Czech Republic," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2019(1), pages 65-83.
    3. Bruno Chiarini & Simona Monteleone, 2016. "Discretionary policy, strategic complementarity and tax evasion: a strategic analysis of the Italian audit mechanism," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(1), pages 99-117, April.
    4. Boștină Florin, 2017. "A VAR Analysis Regarding Tax Evasion and Tax Pressure in Romania," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 505-509, December.
    5. Anastasiou Athanasios & Kalligosfyris Charalampos & Kalamara Eleni, 2021. "Determinants of tax evasion in Greece: Econometric analysis of co-integration and causality, variance decomposition and impulse response analysis," Bulletin of Applied Economics, Risk Market Journals, vol. 8(1), pages 29-57.
    6. Betty Annan & William Bekoe & Edward Nketiah-Amponsah, 2013. "Determinants of Tax Evasion in Ghana: 1970-2010," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 6(3), pages 97-121, December.
    7. Lumir Abdixhiku, Geoff Pugh, Iraj Hashi, 2018. "Business Tax Evasion in Transition Economies: A Cross-Country Panel Investigation," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 15(1), pages 11-36, June.
    8. S. N. Alpysbaeva & G. V. Stroeva & Sh. Zh. Shuneev & A. A. Bakdolotov, 2020. "Transition to the Progressive Scale of Individual Income Tax in Kazakhstan: Opportunities and Limitations," Studies on Russian Economic Development, Springer, vol. 31(1), pages 120-127, January.
    9. Francesco Busato & Bruno Chiarini & Pasquale De Angelis & Elisabetta Marzano, 2008. "Firm-oriented policies, tax cheating and perverse outcomes," Discussion Papers 10_2008, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
    10. Lucia Mihóková & Radovan Dráb & Andrea Kralik, 2019. "Determinants of Short-term Fiscal Imbalance: the Role of Tax Evasion as Fiscal Determinant Within European Countries," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 67(2), pages 515-534.

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    More about this item

    Keywords

    effective tax rate; VAT evasion; tax evasion; apparent tax rate; VECM;
    All these keywords.

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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