We estimate social externalities of tax evasion in a model where congestion of the auditing resources of local tax authorities generates a social multiplier. Identification is based on a contrast of the variance of tax evasion at different levels of aggregation. We use a unique data set that contains audits of about 80,000 small businesses and professionals in Italy and also provides an exact measure of reference groups in our model. We find a social multiplier of about 3, which means that the equilibrium response to a shock that induces an exogenous variation in mean concealed income is about 3 times the initial average response. This is a short-run effect that persists to the extent that auditing resources are not adjusted to internalize the congestion externality.

The tax evasion social multiplier

ZANELLA, GIULIO
2012

Abstract

We estimate social externalities of tax evasion in a model where congestion of the auditing resources of local tax authorities generates a social multiplier. Identification is based on a contrast of the variance of tax evasion at different levels of aggregation. We use a unique data set that contains audits of about 80,000 small businesses and professionals in Italy and also provides an exact measure of reference groups in our model. We find a social multiplier of about 3, which means that the equilibrium response to a shock that induces an exogenous variation in mean concealed income is about 3 times the initial average response. This is a short-run effect that persists to the extent that auditing resources are not adjusted to internalize the congestion externality.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/111394
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