Tax evasion and enforcement
Routledge Handbook of the Informal Economy, Taylor & Francis Ltd, ss.14-22, 2024
- Yayın Türü: Kitapta Bölüm / Araştırma Kitabı
- Basım Tarihi: 2024
- Doi Numarası: 10.4324/9781003370888-2
- Yayınevi: Taylor & Francis Ltd
- Sayfa Sayıları: ss.14-22
- Boğaziçi Üniversitesi Adresli: Evet
Özet
Tax evasion has profound implications for both efficiency and equity, which are fundamental concerns in economics. Recent estimates of the average annual tax gaps in developed countries indicate that tax evasion is ubiquitous. However, most standard models in taxation assume full enforcement and compliance, raising concerns that the conclusions and policy recommendations derived from these models may not be accurate or applicable. This chapter delves into the relationship between tax evasion, enforcement, and the informal economy by critiquing the limitations of the canonical model of tax evasion and underscoring the significance of information reporting and behavioral public finance. Although the primary focus is on individuals and income taxation, the chapter also addresses value added tax (VAT) and firm tax evasion in relevant sections. The first part introduces the canonical model of tax evasion (Allingham and Sandmo, 1972) and discusses its implications. Existing models suggest a negative correlation between tax evasion and the penalty rate, the fine, and, surprisingly, the marginal tax rate. Conversely, a taxpayer's tax evasion tends to increase with their income. The following section draws attention to common and distinct elements of tax evasion and the informal economy. It analyzes a simple model of labor choice considering tax evasion and the informal sector. The subsequent section emphasizes the importance of information reporting and the bidirectional flow of information between taxpayers and the government. In the final part, the chapter discusses a behavioral economics approach to tax evasion. Despite the tax gap being substantial, it is still lower than what the standard theory suggests. While the tax evasion literature does not unanimously attribute this discrepancy between theory and empirical evidence to behavioral effects versus the potential lack of information reporting technologies, numerous papers in the behavioral tax evasion literature propose that many taxpayers may not base their decisions solely on maximizing potential monetary benefits. The chapter concludes by summarizing the main findings and potential policy implications derived from the literature, along with possible strategies to enhance compliance.