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http://ssrn.com/abstract=1265282
 
 

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Cash Businesses and Tax Evasion


Susan C. Morse


University of Texas at Austin - School of Law

Stewart Karlinsky


San Jose State University - Donald and Sally Lucas Graduate School of Business

Joseph Bankman


Stanford Law School

September 8, 2008

Stanford Law & Policy Review, Vol. 20, 2009

Abstract:     
This paper offers interview data on the tax compliance behavior of small cash businesses. We find that such businesses systematically underpay income, employment and sales taxes through income underreporting. The results show that participation in a parallel cash economy facilitates tax evasion and that cash business owners seek out sympathetic tax preparers. We also find that norms and opportunity, but not equity or tax law complexity, strongly influence such decisions to underreport income. The behavior patterns indicated by our data suggest specific policy tactics in the effort to close the tax gap.

Number of Pages in PDF File: 32

Keywords: tax compliance, tax evasion, small businesses

JEL Classification: H24, H25, H26

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Date posted: September 11, 2008 ; Last revised: November 14, 2012

Suggested Citation

Morse, Susan C. and Karlinsky, Stewart and Bankman, Joseph, Cash Businesses and Tax Evasion (September 8, 2008). Stanford Law & Policy Review, Vol. 20, 2009. Available at SSRN: http://ssrn.com/abstract=1265282

Contact Information

Susan C. Morse (Contact Author)
University of Texas at Austin - School of Law ( email )
727 East Dean Keeton Street
Austin, TX 78705
United States
Stewart Karlinsky
San Jose State University - Donald and Sally Lucas Graduate School of Business ( email )
One Washington Square
San Jose, CA 95192-0066
United States
Joseph Bankman
Stanford Law School ( email )
559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
650-725-3825 (Phone)
650-725-7663 (Fax)
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