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The Distributional Component of the Price of the Tax Avoidance Service

Author

Listed:
  • Damjanovic, Tatiana

    (Dept. of Economics, Stockholm School of Economics)

Abstract
The traditional avoidance literature undeservedly neglects tax base distribution as a factor affecting the avoidance price, and generally assumed to be equal to the avoidance cost. In reality, avoidance providers are usually either high-skilled specialists or insiders. The strong collusion thus, naturally seems to be an assumption of the behavior of avoidance providers. Within such a framework, income distribution, which forms an avoidance demand together with tax codes, plays a very essential roll for the outcome of both avoidance price and quantity. My article models an economy with a monopolistic avoidance provider and imperfect information, and illustrates possible consequences of tax base changes. The paper examines the relationship between inequality and a government's ability to collect tax revenue, and also considers the possible outcome of a tax base broadening. Furthermore, it provides an additional explanation for the secession decision.

Suggested Citation

  • Damjanovic, Tatiana, 2001. "The Distributional Component of the Price of the Tax Avoidance Service," SSE/EFI Working Paper Series in Economics and Finance 0454, Stockholm School of Economics, revised 03 Dec 2001.
    • Handle: RePEc:hhs:hastef:0454
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    File URL: http://swopec.hhs.se/hastef/papers/hastef0454.pdf
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    Citations

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    Cited by:

    1. Damjanovic, Tatiana & Ulph, David, 2010. "Tax progressivity, income distribution and tax non-compliance," European Economic Review, Elsevier, vol. 54(4), pages 594-607, May.
    2. Damjanovic, Tatiana & Ulph, David, 2010. "Tax progressivity, income distribution and tax non-compliance," European Economic Review, Elsevier, vol. 54(4), pages 594-607, May.

    More about this item

    Keywords

    Tax avoidance; optimal taxation; income distribution; endogenous prices; inequality; tax base broadening; secession.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D69 - Microeconomics - - Welfare Economics - - - Other
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F15 - International Economics - - Trade - - - Economic Integration
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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