Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/144528
Authors: 
Vasilev, Aleksandar
Year of Publication: 
2015
Abstract: 
This paper provides a quantitative evaluation of the welfare effect of the introduction of proportional taxation in Bulgaria in 2008, an effect that operates through the grey economy channel. Using a general-equilibrium model, augmented with informal sector, a computational experiment is performed to evaluate the welfare gain from the adoption of proportional taxation. The lower effective tax burden in the new tax regime produces a relocation of people into the official sector, stimulates investment, and increases output and consumption. Finally, under the flat tax regime, the size of the informal sector is smaller, and quantitatively consistent with OECD (2009) and European Commission (2012) figures.
Subjects: 
taxation
informal sector
JEL: 
D91
J46
Document Type: 
Preprint

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