Corruption, Tax Evasion and the Laffer Curve

Abstract

In a corrupt tax administration a rise in tax ratesets off complicated strategic moves by both taxpayersand administrators. It is shown that in somecircumstances, this may bring about Laffer likebehavior of overall tax revenue, i.e. a higher taxrate results in smaller net revenue for thegovernment. Further, a more intense tax effort byincreasing the number of returns audited may alsoreduce net revenues. Finally if tax and fine ratespositively influence the level of corruption in theadministration, these outcomes become more likely.

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Sanyal, A., Gang, I.N. & Goswami, O. Corruption, Tax Evasion and the Laffer Curve. Public Choice 105, 61–78 (2000). https://doi.org/10.1023/A:1005105822911

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Keywords

  • Public Finance
  • Strategic Move