Tax evasion and the cost of public sector activities

Abstract

This paper examines the effects that tax evasion has on the cost to produce goods and service in an environment where input prices are homogenously taxes, but evasion is intersectorially differentiated. Tax evasion raises the relative cost of producing goods and services in the sectors where evasion is more difficult. Such effects adds a potentially important, but so far neglected, element to the relative cost of goods and services produced by the public sector. The general equilibrium analysis presented in this paper shows the perverse effects of tax evasion which reduces total production (hence total wealth) even in a model where, due to the absence of redistributive effects, tax evasion is simply fiscal illusion.

Similar works

Full text

thumbnail-image

Research Papers in Economics

Provided original full text link
Last time updated on 7/6/2012

This paper was published in Research Papers in Economics.

Having an issue?

Is data on this page outdated, violates copyrights or anything else? Report the problem now and we will take corresponding actions after reviewing your request.