Tax Amnesties as Asset Laundering Devices

Journal of Law, Economics, & Organization, Volume 12, No. 2, Fall 1996.

Posted: 21 Oct 1996

See all articles by Arindam Das-Gupta

Arindam Das-Gupta

Goa Institute of Management

Dilip Mookherjee

Boston University - Department of Economics

Abstract

This paper analyses the effect of a one-time tax amnesty intended to induce private citizens to voluntarily declare black assets accumulated from past tax evasion. In a dynamic setting, we find that such an amnesty tends to enhance voluntary taxpayer compliance and reduce the size of the underground economy. However, it also generally tends to reduce aggregate net revenues collected by the government in the long run, provided black assets command a higher pretax rate of return than white assets. This owes to a post- amnesty reduction in involuntary revenue collections that outweighs direct amnesty receipts and the increase in voluntary compliance. The desirability of such amnesties thus depends on the importance of unearthing black assets per se relative to increasing revenue collections.

JEL Classification: H26, H30, K42

Suggested Citation

Das-Gupta, Arindam and Mookherjee, Dilip, Tax Amnesties as Asset Laundering Devices. Journal of Law, Economics, & Organization, Volume 12, No. 2, Fall 1996., Available at SSRN: https://ssrn.com/abstract=10174

Arindam Das-Gupta

Goa Institute of Management ( email )

Ribandar, Goa 403006
India
91-832-2490300 (Phone)

HOME PAGE: http://www.gim.ac.in

Dilip Mookherjee (Contact Author)

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States
617-353-4392 (Phone)
617-353-4143 (Fax)

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