This paper investigates the relationship between the disparity in tax base and
tax collection. I address the tax collection problem with traditional industrial
organization approach. Thus, I model the "tax minimization" industry
where the supplier helps taxpayers to avoid their tax liability. I find that
lower income inequality as well as a less progressive tax code may result in
a smaller number of tax payers committing to their tax duties. Finally, I question
the reduction in the highest tax rate as a policy directed at the improvement
of tax discipline.
Keywords
Endogenous prices, tax collection, inequality, tax progressivity.
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