Income Tax Avoidance and Evasion: A Narrow Bracketing Approach

Duccio Gamannossi Degl'Innocenti, Duccio Gamannossi Degl’Innocenti, Matthew D. Rablen

Risultato della ricerca: Contributo in rivistaArticolo in rivista

3 Citazioni (Scopus)

Abstract

We characterize optimal individual tax evasion and avoidance when taxpayers “narrow bracket” the joint avoidance/evasion decision by exhausting all gainful methods for legal avoidance before choosing whether or not also to evade illegally. We find that (1) evasion is an increasing function of the audit probability when the latter is low enough, yet tax avoidance is always decreasing in the probability of audit; (2) an analogous finding to the so-called Yitzhaki puzzle for evasion also holds for tax avoidance—an increase in the tax rate decreases the level of avoided income and the level of avoided tax; and (3) that, holding constant the expected return to evasion, it is not always the case that the combined loss of reported income due to avoidance and evasion can be stemmed by increasing the fine rate and decreasing the audit probability.
Lingua originaleEnglish
pagine (da-a)815-837
Numero di pagine23
RivistaPublic Finance Review
Volume45
DOI
Stato di pubblicazionePubblicato - 2017

Keywords

  • tax avoidance, tax evasion, narrow bracketing, financial intermediaries

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