Tax rates, tax administration and income tax evasion in Switzerland

Abstract

This paper contains an empirical analysis of income tax noncompliance in Switzerland, based on the standard model of tax evasion. Noncompliance is found to be positively related to the marginal tax burden and negatively to the probability of audit, though the latter impact is only weak. There is no evidence of a significant deterrent effect of the penalty tax. The extended model reveals that noncompliance is positively related to inflation. Finally, noncompliance is significantly lower when citizens/taxpayers have direct control over government budgets, whereas the opposite holds when there is no such control.

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The paper has benefitted from useful comments by Rodney Beard, Albert Hart, Susanne Krebs, Agnar Sandmo, and participants at various conferences. Werner Pommerehne unexpectedly died of a heart attack on October 8, 1994. With him I lost a most creative teacher, an excellent co-author and a very good friend. This manuscript has been written and revised before his death.

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Pommerehne, W.W., Weck-Hannemann, H. Tax rates, tax administration and income tax evasion in Switzerland. Public Choice 88, 161–170 (1996). https://doi.org/10.1007/BF00130416

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Keywords

  • Empirical Analysis
  • Public Finance
  • Extended Model
  • Direct Control
  • Deterrent Effect