The relationship between income inequality
and tax evasion is a complexone. Bloomquist finds a positive correlation
between a measure of income in equality and the under reporting rate for wage
and salary income. On one hand, if individuals incentive for tax evasion is
income related, then the share of tax evaders and the total amount of tax
evaded depend on the distribution of income. On the other hand, the specific
design ofthe tax system, together with social norms and laws, affect the
after-tax distribution of income.
This paper studies the effect of income
inequality on tax evasion. To discuss the topic, the article presents a simple
model that incorporates incentives for tax compliance such as punishment and
fines, intrinsic motivation and social norms.In this framework, the paper considers
the hypothesis that social norms are group specific as in the case of social
segregation or status related networks. The conclusion shows that all the
negative effects of inequalities are amplified: the difference between the tax
compliance of the income groups and the value of tax evasion increase.
Article by Fabrizio
Patriarca,et al,from Sapienza University of Rome.
Full access: http://mrw.so/2KqtrD
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