A Growth Model with Income Tax Evasion: Some Implications for Australia.

• Autores: Ratbek Dzhumashev, Emin Gahramanov
• Localización: Economic record, ISSN 0013-0249, Vol. 86, Nº. 275, 2010, págs. 620-636
• Idioma: inglés
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• Resumen

  • We develop an endogenous growth model à la Barro (1990), augmented with income tax evasion. Unlike many traditional rational choice models of tax evasion, the numerical simulations of our model do not produce counter-intuitive results. Further, we show that: (i) accounting for evasion costs (while capturing the full risk associated with the tax evasion process) is important for obtaining realistic relationships between key model variables; (ii) productive government expenditures explicitly affect the economy's tax evasion rate; (iii) Barro's natural efficiency condition for setting the optimal statutory tax rate holds even in the presence of tax evasion; (iv) given realistic estimates of the public expenditure externality, the average marginal income tax rate in Australia is not too far away from the optimal one; and (v) differences in tax evasion opportunities aggravate inequality over time.