Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108121
Authors: 
Gillman, Max
Kejak, Michal
Year of Publication: 
2008
Series/Report no.: 
IEHAS Discussion Papers MT-DP - 2008/6
Abstract: 
The paper formalizes the relation between flat taxes and growth when there is a competitive equilibrium tax evasion. A decentralized tax evasion service is supplied by the banking sector. The bank production function follows the financial intermediation microfoundation approach, with deposits as an input. Across a class of endogenous growth models, tax evasion decreases the effective tax rate, and thereby lessens the negative effect of taxes on growth. And as the tax rate rises, tax evasion causes the growth rate to fall by less. Underlying the results is a fiscal principle whereby tax evasion creates, or magnifies, a rising demand price sensitivity to higher tax rates.
Subjects: 
Tax evasion
financial intermediation
endogenous growth
and flat taxes
JEL: 
E13
E62
H26
O41
ISBN: 
978-963-9796-21-8
Document Type: 
Working Paper

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