Can Tax Reform Work in an Economy Where Tax Avoidance and Evasion are Endemic?

In this model firms seek to minimise their tax liabilities by purchasing rent seeking services from a provider who also sells legitimate public services to the government. The provider enjoys economies of scope — its two outputs are produced jointly. Tax reform in this setting can increase both government revenue and the efficiency of the economy because a type of Laffer curve is operational and because such reform can lead to resources being moved out of rent-seeking activity. Later this partial equilibrium framework will be embedded within a conventional general equilibrium model.


Issue Date:
Jan 01 1998
Publication Type:
Working or Discussion Paper
Record Identifier:
http://ageconsearch.umn.edu/record/266343
Language:
English
Total Pages:
37
JEL Codes:
D72
Series Statement:
Preliminary Working Paper No. IP-71




 Record created 2018-01-05, last modified 2018-01-22

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