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The Design of Commodity Taxes in the Presence of Tax Evasion with Illustrative Evidence From India

journal contribution
posted on 2023-05-16, 11:19 authored by Ray, R
This article analyzes the impact of tax evasion in the optimal commodity tax model with heterogeneous individuals. A recent model of indirect tax evasion is applied to the many-person case. Indian data show that sales underreporting has a major impact on tax design, and makes the optimal commodity taxes more redistributive. Thus, tax evasion plays a role similar to that of inequality aversion in traditional tax calculations. The tax evasion parameter is endogenized and shown to be nonuniform across items. The article also introduces a framework that allows simultaneous analysis of commodity and income tax evasion. © 1998, Sage Publications. All rights reserved.

History

Publication title

Public Finance Review

Volume

26

Issue

5

Pagination

503-518

ISSN

0048-5853

Department/School

TSBE

Publisher

Sage

Place of publication

Thousand Oaks, CA

Repository Status

  • Restricted

Socio-economic Objectives

Taxation

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