Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/328802 
Year of Publication: 
2023
Citation: 
[Journal:] Economies [ISSN:] 2227-7099 [Volume:] 11 [Issue:] 7 [Article No.:] 177 [Year:] 2023 [Pages:] 1-19
Publisher: 
MDPI, Basel
Abstract: 
We here examine the frequent claim that an increase in the tax base and a decrease in tax evasion will compensate for a loss in tax revenues caused by a lower tax level. Using a unique data set for the estimated underground economy in Italy from 1982 to 2006, we found that a loss in tax revenues equivalent to 1% of the GDP would be partly compensated by an increase in GDP of 0.55%. The compensation would come from 0.31% of the GDP increase and from 0.24% of the reductions in the underground economy. These results apply to an economy with a high tax level (>32%) and a high underground economy (≥25%). Applying a high-resolution lead-lag method to the data, we ensured that tax changes were leading the GDP and, thus, a potential cause for changes in the GDP.
Subjects: 
tax policy
GDP
underground economy
tax evasion
self-financing
JEL: 
O17
C63
E52
H26
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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