The aim of this paper is to analyze the shadow economy in the Spanish Autonomous Communities. In so doing, we employ the Currency Demand Approach to analyze the 1987–2010 period. The results show that the size of the shadow economy ranges from 18% to 30% of regional GDP and an approximate mean value of 25% for the entire territory. The Personal Income Tax has the greatest impact on the shadow e...

The paper studies the determinants of information sharing between Swedish tax authorities and 14 EU tax authorities for value-added tax (VAT) purposes. It is shown that trade-related variables (such as the partner country’s net trade position and population size), reciprocity, and legal arrangements are significant determinants of Sweden’s trade in tax information. Countries that are net export...

We developed a simple monetary model to study the effects of tax evasion on the optimal inflation tax. The model is constructed so that inflation might be an indirect way of taxing the underground sector of the economy. We show that while there are theoretical reasons for positive optimal inflation rates, the effects are quantitatively small, even in countries with large underground sectors. We...

The Last Refuge of a Scoundrel? Patriotism and Tax Compliance We study the effects of patriotism on tax compliance. In particular, we assume that individuals feel a (random draw of) warm glow from honestly paying their taxes. A higher expected warm glow reduces the government's optimal audit probability and yields higher tax compliance. Second, individuals with higher warm glow are less likely ...

In this paper we analyze how the tax compliance policy affects the rate of economic growth. We consider a model of overlapping generations in which the paths of all the macroeconomic variables are endogenously determined and we perform the comparative statics analysis of changes in both the probability of inspection and the penalty fee imposed on tax evaders. We also show the nonoptimality from...

Field evidence suggests that people belonging to the same group often behave similarly, i.e., behavior exhibits social interaction effects. We conduct a laboratory experiment that avoids the identification problem present in the field and allows us to study the behavioral logic of social interaction effects. Our novel design feature is that each subject is simultaneously a member of two randoml...

This paper examines the implications of tax evasion for "scal competition and tax harmonization policies in an economic union. First, for symmetric countries, it proves that the equilibrium values of the tax and audit rates are less than optimal. Tax harmonization alone will also lead to a less than optimal audit rate. Second, for asymmetric countries, the paper shows that integration may turn ...

Tax Evasion: Cheating Rationally or Deciding Emotionally? The economic models of tax compliance predict that individuals should evade taxes when the expected benefit of cheating is greater than its expected cost. When this condition is fulfilled, the high compliance however observed remains a puzzle. In this paper, we investigate the role of emotions as a possible explanation of tax compliance....

What Shapes Attitudes Toward Paying Taxes? Evidence from Multicultural European Countries Considerable evidence suggests that enforcement efforts cannot fully explain the high degree of tax compliance. To resolve this puzzle of tax compliance several researchers have argued that citizens’ attitudes toward paying taxes defined as tax morale helps to explain the high degree of tax compliance. How...

This paper presents an analysis of the extent to which tax planning affects the level of the inheritance tax rate that is perceived to be fair. In a factorial survey conducted in Germany, tax planning was found to increase the fair tax rate by approximately 4 percentage points. The fair tax rate is determined by not only the size of the bequest, the relationship of the heir to the bequeather, a...