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Anticorruption reforms, tax evasion, and the role of harassment

journal contribution
posted on 01.02.2019, 00:00 authored by D S Banerjee, Samarth VaidyaSamarth Vaidya
We examine the impact of anticorruption reforms on tax evasion when corruption and potentially harassment are endemic among tax auditors. We find that the threat of harassment may counterintuitively boost the impact of such anticorruption reforms on tax evasion and also eliminate corruption. Specifically, a moderate anticorruption policy can discontinuously reduce tax evasion to a level even below that under no corruption. Further strengthening of such policy can nonetheless prove counterproductive and increase tax evasion. On the contrary, in the absence of harassment, a moderate anticorruption reform induces higher tax evasion and sustenance of bribery. In this case, only a large reform can reduce tax evasion and eliminate corruption.

History

Journal

Journal of public economic theory

Volume

21

Issue

1

Pagination

62 - 80

Publisher

Wiley

Location

Chichester, Eng.

ISSN

1097-3923

eISSN

1467-9779

Language

eng

Publication classification

C Journal article; C1 Refereed article in a scholarly journal

Copyright notice

2018, Wiley Periodicals, Inc.

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