Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/80877
Authors: 
Goerke, Laszlo
Year of Publication: 
2013
Series/Report no.: 
IAAEU Discussion Paper Series in Economics 01/2013
Abstract: 
Relative consumption effects or status concerns that feature jealousy (in the sense of Dupor and Liu, AER 2003) boost consumption expenditure. If consumption is financed by labour income, such status considerations increase labour supply and, hence, the tax base. A higher taxable income, in turn, can make tax evasion more attractive. We show for various specifications of preferences that the tax base effect generally dominates. Consequently, relative consumption effects tend to reduce tax evasion. This is true, irrespective of whether tax parameters are exogenous, guarantee a balanced budget or are set optimally.
Subjects: 
Income taxes
Optimal taxation
Relative consumption
Tax evasion
JEL: 
D62
H21
H23
H24
H26
Document Type: 
Working Paper

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