European Parliament Library

Tax Rate Cuts and Tax Compliance—The Laffer Curve Revisited, Tamás Papp, Elöd Takáts

The paper shows how tax rate cuts can increase revenues by improving tax compliance. The intuition is that tax evasion has externalities: tax evaders protect each other, because they tie down limited enforcement capacity. Thus, relatively small tax rate cuts, which decrease incentives to evade taxes, can lead to increased revenues through spillovers - creating Laffer effects. Interestingly, tax rate cuts here imply increasing effective taxes. The model is consistent with what happened in Russia, and may provide basis for further thinking about tax rate cuts in other countries
Table Of Contents
Contents; I. Motivation; II. Model; A. Endogenous enforcement; B. Compliance and labor choice; C. Equilibrium and comparative statics; III. Illustrative example; Text Figures; 1. Equilibrium; 2. Tax rate change: 1 percent; 3. Tax rate change: 5 percent; IV. Conclusion; 4. Changing tax authority time endowment (τ): 5 percent; 5. Changing tax authority time endowment (τ): 50 percent ..; 6. Laffer curve; 7. Laffer curve decomposition; V. Appendix; A. Comparative statics for φ; B. Multiple equilibria; 8. Multiple equilibria; References
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (22 p.)
Specific Material Designation
Form Of Item

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