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On the Relative Size of Direct and Indirect Taxation

Author

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  • Soldatos, Gerasimos T.

Abstract

Modifying the standard analytical apparatuses for direct and indirect tax evasion to incorporate forward indirect tax shift in a monopolistically competitive environment, this paper maintains that indirect tax evasion would exceed for sure direct tax evasion only under consumer risk neutrality and a tax policy zeroing the tax shift. Also, in the presence of tax evasion, there cannot be optimal direct-indirect tax mix, because tax evasion is accompanied by uncertainty and hence, nonlinearities in the tax schedules that cannot be dealt with at least practically.

Suggested Citation

  • Soldatos, Gerasimos T., 2014. "On the Relative Size of Direct and Indirect Taxation," MPRA Paper 60857, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:60857
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    File URL: https://mpra.ub.uni-muenchen.de/60857/1/MPRA_paper_60857.pdf
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    References listed on IDEAS

    as
    1. Joel Slemrod, 2007. "Cheating Ourselves: The Economics of Tax Evasion," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 25-48, Winter.
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    More about this item

    Keywords

    Direct and indirect tax evasion; Forward indirect tax shift; Consumer risk neutrality;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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