Arbeitspapier
Income tax buyouts and income tax evasion
A tax buyout is a contract between tax authorities and a tax payer which reduces the marginal income tax rate in exchange for a lump-sum payment. While previous contributions have focussed on labour supply, we consider the interaction with tax evasion and show that a buyout can increase expected tax revenues. This will be the case if (1) the audit probability is constant and the penalty for evasion is a function of undeclared income or (2) the penalty depends on the amount of taxes evaded, and authorities use information about income generated by the decision about a tax buyout offer when setting audit probabilities. Since individuals will only utilise a tax buyout if they are better off, higher tax revenues imply that such contracts can be Pareto-improving.
- Language
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Englisch
- Bibliographic citation
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Series: IAAEU Discussion Paper Series in Economics ; No. 01/2014
- Classification
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Wirtschaft
Asymmetric and Private Information; Mechanism Design
Taxation and Subsidies: Efficiency; Optimal Taxation
Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
Tax Evasion and Avoidance
- Subject
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Asymmetric information
Revenues
Self-selection
Tax buyouts
Tax evasion
- Event
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Geistige Schöpfung
- (who)
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Goerke, Laszlo
- Event
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Veröffentlichung
- (who)
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University of Trier, Institute for Labour Law and Industrial Relations in the European Union (IAAEU)
- (where)
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Trier
- (when)
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2014
- Handle
- Last update
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10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Goerke, Laszlo
- University of Trier, Institute for Labour Law and Industrial Relations in the European Union (IAAEU)
Time of origin
- 2014