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Author Hibbs, Douglas A. ♦ Piculescu, Violeta
Source CiteSeerX
Content type Text
File Format PDF
Subject Domain (in DDC) Computer science, information & general works ♦ Data processing & computer science
Subject Keyword Unofficial Economy ♦ Tax Toleration ♦ Tax Compliance ♦ Empirical Analysis ♦ Private Firm ♦ Firm Tax Toleration ♦ High-grade Institution ♦ Tax Rate ♦ Institutional Variable ♦ Profit-maximizing Firm ♦ Official Economy ♦ Underground Depends ♦ Firm-specific Threshold ♦ Enterprise-level Data ♦ Cross-national Pattern ♦ Unofficial Production ♦ Official Production ♦ Government-supplied Institutional Benefit ♦ Key Prediction ♦ Broad Support ♦ Big Deal
Abstract How do government-supplied institutional benefits and the taxation and regulation of producers affect the propensity of private firms to enter the unofficial economy and evade taxation? We propose a model in which the incentive of firms to operate underground depends on tax rates relative to firm-specific thresholds of tax toleration that are decisively affected by quality of governance—in particular by the presence of high-grade institutions delivering services enhancing official production that anchor profit-maximizing firms to the official economy. Some key predictions of the model concerning the determinants of firms ’ tax toleration and tax compliance receive broad support from empirical analyses of enterprise-level data from the World Bank’s World Business Environment Surveys. Unofficial production of goods and services is a big deal—an activity engaged in by millions of firms employing hundreds of millions of workers and producing trillions of dollars of output internationally. 1 The lion’s share of research on the determinants of the scale of the unofficial economy investigates cross-national patterns among aggregate economic and institutional variables. The micro political-economic
Educational Role Student ♦ Teacher
Age Range above 22 year
Educational Use Research
Education Level UG and PG ♦ Career/Technical Study