Tax Evasion, Information Reporting, and the Regressive Bias Hypothesis
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Tax Evasion, Information Reporting, and the Regressive Bias Hypothesis. / Boserup, Simon Halphen; Pinje, Jori Veng.
Economic Policy Research Network, Department of Economics, University of Copenhagen, 2010.Research output: Working paper › Research
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TY - UNPB
T1 - Tax Evasion, Information Reporting, and the Regressive Bias Hypothesis
AU - Boserup, Simon Halphen
AU - Pinje, Jori Veng
N1 - JEL classification: D82, H26, K42
PY - 2010
Y1 - 2010
N2 - A robust prediction from the tax evasion literature is that optimal auditing induces a regressive bias in effective tax rates compared to statutory rates. If correct, this will have important distributional consequences. Nevertheless, the regressive bias hypothesis has never been tested empirically. Using a unique data set, we provide evidence in favor of the regressive bias prediction but only when controlling for the tax agency's use of third-party information in predicting true incomes. In aggregate data, the regressive bias vanishes because of the systematic use of third-party information. These results are obtained both in simple reduced-form regressions and in a data-calibrated state-of-the-art model.
AB - A robust prediction from the tax evasion literature is that optimal auditing induces a regressive bias in effective tax rates compared to statutory rates. If correct, this will have important distributional consequences. Nevertheless, the regressive bias hypothesis has never been tested empirically. Using a unique data set, we provide evidence in favor of the regressive bias prediction but only when controlling for the tax agency's use of third-party information in predicting true incomes. In aggregate data, the regressive bias vanishes because of the systematic use of third-party information. These results are obtained both in simple reduced-form regressions and in a data-calibrated state-of-the-art model.
M3 - Working paper
BT - Tax Evasion, Information Reporting, and the Regressive Bias Hypothesis
PB - Economic Policy Research Network, Department of Economics, University of Copenhagen
ER -
ID: 32171027