Income tax buyouts and income tax evasion

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Income Tax Buyouts and Income Tax Evasion Abstract A tax buyout is a contract between tax authorities and a tax payer which reduces the marginal income tax rate in exchange for a lump-sum payment. While previous contributions have focussed on labour supply, we consider the interaction with tax evasion and show that a buyout can increase expected tax revenues. This will be the case if (1) the audit probability is constant and the penalty for evasion is a function of undeclared income or (2) the penalty depends on the amount of taxes evaded, and authorities use information about income generated by the decision about a tax buyout offer when setting audit probabilities. Since individuals will only utilise a tax buyout if they are better off, higher tax revenues imply that such contracts can be Pareto-improving. Terms of use: Documents in EconStor mayJEL-Code: D820, H210, H240, H260.

International Trade and Tax Evasion in Benin

“…Contrary to Alm & Jackson (1992), a number of studies such as Yaniv (2013), Boryana (2011), Goerke (2015) and Bayer (2006) supported a positive relationship between tax rates and tax evasion. Similarly, examining tax evasion in China based on imports from Hong Kong, Fisman & Wei (2004) find that a 1% increase in the tax rate results in a 3% increase in evasion.…”

Tax Aversion, Laffer Curve, and the Self-financing of Tax Cuts

“…An exception to the persistence of the decision for tax aversion appears to the case according to which this decision is made aiming at earning the money needed to pay to the tax authority some fixed price for the reduction of the marginal tax rate; it is the case of the so called "tax buyouts", (Goerke 2015). Also, judging from the work of Strulik (2010) about anticipated tax reforms and temporary tax cuts, tax aversion might prove to be temporary in this case, too.…”

Voluntary disclosure schemes for offshore tax evasion

“…We connect to a literature on the use by tax authorities of pre-audit settlements in which taxpayers can acquire full (e.g., Chu, 1990;Glen Ueng and Yang, 2001) or partial (Goerke, 2015) insurance from audit risk. These settlements are shown to yield a Pareto improvement relative to random auditing as 6 Within eight months of the G20 summit of April 2009 tax havens had signed more than 300 treaties (Johannesen and Zucman, 2014).…”